U.S. President Donald Trump’s suggestion of introducing a 50-year mortgage has garnered attention from potential first-time homebuyers in America looking for more affordable housing options. However, many experts in the industry have criticized the idea of extending the typical 30-year loan term commonly used in the U.S. This proposal is unlikely to gain traction in Canada, where amortization periods have been reduced over the past two decades.
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. Advocates of longer mortgages, including Bill Pulte from the Federal Housing Finance Agency, believe it could significantly impact affordability in the housing market. Trump highlighted that the main advantage of a 50-year mortgage is lower monthly payments, albeit at the cost of paying substantially more interest over the loan’s lifetime.
Real estate and finance professor Joseph Gyourko noted that while the reduced monthly payment is appealing, the long-term interest payments could outweigh the benefits. Experts like Richard Kent Green caution that a 50-year mortgage might offer minimal savings and could expose homeowners to higher risks, especially in volatile market conditions.
In contrast to the U.S. mortgage system, Canada’s approach to mortgages differs due to a stronger emphasis on risk aversion. In Canada, mortgages are typically funded through deposit business like savings accounts and GICs, limiting the amortization period to 25 years for insured borrowers and 30 years for uninsured borrowers. Although there have been discussions about extending amortization periods in Canada, the focus remains on maintaining financial stability and avoiding excessive risk in the mortgage market.
Industry professionals, including Mortgage Professionals Canada, have advocated for extending insured amortizations from 25 to 30 years to enhance affordability for homebuyers. Despite some adjustments, the Canadian government has been cautious about extending amortization periods beyond current limits. Experts suggest that while changes may occur in the future, any modifications will be carefully considered to ensure the stability and integrity of the mortgage system.