A home mortgage is usually the largest loan most people ever get. It is frequently the longest-term loan you'll ever have, too. Historically, in the U.S., average mortgage loan terms range from 15 to 30 years. Pressures in the current housing market have led to some lenders offering longer terms. Still, these new longer-term options haven't reached the record average term of 140 years held by Sweden.
Maximum U.S. Mortgage Term Lengths
The 30-year mortgage is still very popular in the U.S. housing market. However, a combination of financial pressures prompts increasing consumer demand for longer mortgage terms. As of 2019, private lenders and several federal government agencies offer 35 and 40-year mortgages to borrowers. With the increasing trend toward longer terms, 50 years is now the longest mortgage term available in the U.S.
Longer Mortgage Terms and Loan Amortization
Extending the term of your mortgage beyond 30 years is an option that helps you decrease your monthly payments for housing. Essentially, this means that you can get more house for less money than you would pay monthly with a 15-year or 30-year mortgage. On the other hand, if you elect to use a 50-year mortgage, unless you're under age 30, it's less likely that you will ever pay off this type of mortgage.
With the longest mortgage term of 50 years, you will have a lower payment than you would for a 30-year mortgage or less. However, these payments won't reduce your loan's principal balance for many years. Your monthly payments will only cover the interest on your loan and your escrow account for at least 10 years and possibly up to 20 years.
Taking the longest mortgage term available has yet another key disadvantage. You won’t build any equity in your home while you make 10 to 20 years of payments on your loan’s interest. This can make selling your home impractical or impossible because your principal balance will remain high.
Longer Mortgage Terms and Interest Rates
Generally, lenders that offer consumers an increased mortgage term length apply a fixed rate of interest on the loan. However, some extended longer-term mortgages have interest rates that are fixed when you take the loan, then change during the life of the loan.
You cannot expect to get the same interest rates for the longest mortgage term that you would with a loan of 30 years or less. The rates are commonly higher by at least one quarter of a percent. Your creditworthiness and monthly expense-to-income ratio might increase your 50-year loan’s rate even more than this average difference.
Due to the higher rate, the total amount of interest that you will pay over the life of your loan will be much more than the total charged on a loan of 30 years or less. You'll wind up paying much more for your house with the longest mortgage term than you would 15-year or 30-year loans.
Mortgage Term Length Additional Considerations
Borrowers who take 50-year mortgage loans also run the risk of reaching retirement age before paying off the loan. In many cases, when you leave the workforce, your income decreases. A loan payment that was feasible while you were working full-time might become unmanageable on your retirement income.
If you live long enough to reach the payoff date for a 50-year loan, some longer loans have built-in balloon payments at the end of their term. Read any loan documents for your mortgage before signing. Use a mortgage calculator to see the amortization for any loan that you are considering. Then decide if lowering your payments is worth paying the additional interest or finding out afterward about surprise loan costs.
- Fannie Mae: Fannie Majors
- LendingTree: 50 Year Fixed Rate Mortgage
- 40 Year Mortgage Calculator: Calculate Local 40-YR Home Loan Payments
- Mortgage Length Comparison
- The Truth About Mortgage: What Mortgage Term Is Best?
- The Telegraph: Sweden Cuts Maximum Mortgage Term to 105 Years (The Average Is 140) /
- 50 Year Mortgage Calculator: Calculate Local 50-YR Home Loan Payments
- Congressional Research Service. “FHA-Insured Home Loans: An Overview,” Page 2. Accessed May 25, 2020.
- HUD.gov. “Common Questions From First-Time Homebuyers.” Accessed May 25, 2020.
- Congressional Research Service. “FHA-Insured Home Loans: An Overview,” Page 5. Accessed May 25, 2020.
- LendingTree. “The Lesser-Known 40-Year Mortgage: What You Should Know.” Accessed May 25, 2020.
- Zillow. “What Is a 40-Year Fixed Mortgage?” Accessed May 25, 2020.
- Fannie Mae. “Modification: How Does It Work?” Accessed May 25, 2020.
- Consumer Financial Protection Bureau. “What Is Negative Amortization?” Accessed May 25, 2020.
- Consumer Financial Protection Bureau. “What Is a Qualified Mortgage?” Accessed May 25, 2020.
- HSH. “What Is a Qualified Mortgage?” Accessed May 25, 2020.
- LendingTree. “The Lesser-Known 40-Year Mortgage: What You Should Know.” Accessed May 22, 2020.
- Realtor.com. “Can I Get a 40-Year Mortgage? You Bet, but It's Not All Good News.” Accessed May 25, 2020.
Carol Luther has published feature articles in print magazines, ghostwritten blogs, and produced digital content since 2007. She has published personal finance and small business articles for the Houston Chronicle, Mahalo, the Nest, USA Today, Wahm, and Zacks. Carol has designed, implemented and managed multi-year, multimillion-dollar domestic and international projects services for higher education, nonprofits, and small to medium businesses for more than 20 years.