My parents bought a two-bedroom home in Levittown, N.Y., in 1948, one of the mass-produced houses that helped define postwar American life.
For them, it was a leap forward, since they’d been living in cramped, flimsy apartments. The Levittown house had radiant heat, a refrigerator and a washing machine. The price tag: $7,600, with a $90 down payment. The monthly tab on a 30-year fixed-rate mortgage, taxes and insurance came to $54.
My grandfather was furious at his son for taking on debt. He had been the head bookkeeper at Anaconda Copper in Yonkers, N.Y., at the start of the Great Depression. More than 30 people worked in his department. Several years into the Depression, only he and one colleague remained.
He held his job but lost his house. The home he bought in the 1920s for about $8,000 sheltered an extended family: his two children, his parents and several of my grandmother’s sisters. When the bank foreclosed, the extended family squeezed into a small, two-bedroom rental.
Blame the mortgage system of the era. Most mortgage loans were interest-only with typical terms of three to five years. Borrowers paid no principal, built no equity and hoped rising home prices would allow for refinancing when the loan matured. That worked, until it didn’t.
When home prices collapsed in the early 1930s, refinancing dried up and foreclosures soared. Franklin D. Roosevelt’s push for the long-term, fully amortized 30-year fixed-rate mortgage was transformative. Predictable payments, gradual equity buildup and a fixed rate turned the 30-year mortgage into one of the pillars of modern middle-class life.
However, to my grandfather, debt symbolized financial recklessness. History, of course, proved otherwise. Which brings us to today’s debate that President Donald Trump ignited: If 30 years worked, why not 50?
Proponents of a 50-year mortgage say the longer maturity could ease the sticker shock of modern housing. Critics (including me) worry half-century mortgages could leave more families financially vulnerable. For one thing, the monthly savings aren’t impressive, while interest costs could end up being twice as high. For another, equity accumulation with the 50-year mortgage will be painfully slow, bad news for homeowners looking to build an equity cushion for their elder years.
