U.S. President Donald Trump has suggested introducing a 50-year mortgage plan, which could be appealing to first-time homebuyers in the United States looking for a more affordable path into the housing market. However, many experts in the industry have criticized the idea of extending the typical 30-year loan term. It is unlikely that such a proposal would gain traction in Canada due to the country’s trend of shortening amortization periods over the past two decades.
Trump initially introduced the concept through a social media post comparing a 30-year mortgage associated with former President Franklin Delano Roosevelt to his proposed 50-year mortgage. Bill Pulte, director of the Federal Housing Finance Agency, expressed support for longer mortgages, calling them a potential game-changer. The White House has suggested that extending amortization could alleviate housing affordability challenges.
While Trump argued that a 50-year mortgage would result in lower monthly payments, Joseph Gyourko, a real estate and finance professor, highlighted that the downside includes significantly higher interest payments over the loan’s lifespan. For instance, calculations by The Associated Press showed that a buyer of a $415,200 home would pay around $389,000 more in interest with a 50-year mortgage compared to a 30-year one.
Richard Kent Green, an expert on housing markets, cautioned that a 50-year loan could lead to slow equity buildup and increased default risk if market conditions change. He viewed Trump’s proposal more as a marketing tactic than a genuine solution.
In Canada, mortgage financing differs from the U.S., primarily due to risk aversion practices. Canadian mortgages are supported by deposit accounts like savings and GICs, limiting the secure timeline for extended loans. The country has previously experimented with longer amortization periods, but regulatory changes have consistently reduced them to the current standard of 25 years for insured borrowers and 30 years for uninsured ones.
Although some have advocated for extending amortizations in Canada, the government has been cautious about introducing longer terms to avoid potential risks and maintain system stability. Mortgage industry experts believe that while there may be incremental changes in the future, significant shifts towards longer amortization periods are unlikely in the near term.
