U.S. President Donald Trump’s suggestion of a 50-year mortgage has intrigued many first-time American homebuyers looking for an affordable entry into the housing market. However, industry experts have criticized the idea of extending the standard 30-year loan term in the U.S. and believe it is unlikely to gain popularity in Canada due to recent reductions in amortization periods.
Trump 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, the Federal Housing Finance Agency director, expressed enthusiasm for longer mortgages, calling them a “game changer.” The White House also highlighted that elongating amortization could alleviate housing affordability issues.
Despite the perceived benefit of lower monthly payments with a 50-year mortgage, there are concerns about significantly higher interest payments over the loan’s lifespan. Real estate and finance expert Joseph Gyourko cautioned against this approach, emphasizing the substantial interest costs incurred over an extended period.
In contrast to the U.S., Canada’s mortgage landscape differs significantly, with a focus on risk aversion. Mortgage specialist Penelope Graham noted that the Canadian system relies on deposit business for mortgage funding, limiting the feasibility of extending amortization periods. While there has been limited discussion around extending amortization in Canada, it remains uncertain given the inherent risks and costs associated with longer mortgage terms.
The government’s cautious approach to mortgage policy adjustments, including temporary extensions for insured first-time homebuyers, reflects the commitment to maintaining financial stability. Mortgage industry professionals advocate for balanced considerations when contemplating longer amortization periods to safeguard the integrity of the financial system. Despite some flexibility in policy adjustments, experts believe that significant changes to amortization periods may not be imminent, as the focus remains on ensuring a stable housing market.
