The 50-Year Mortgage Trap: Why Banks and mREIT Investors Are Smiling While Homebuyers Pay Double

When President Trump proposed extending mortgage terms to 50 years, the headlines focused on lower monthly payments. But the net tangible benefit for borrowers tells a completely different story—and it’s one that exposes a massive wealth transfer from homeowners to financial institutions.

The Math That Should Scare Homebuyers

Let’s start with what sounds appealing: buying a $450,000 home with a standard 30-year mortgage at 6.25% interest means a monthly payment of $2,771. Stretch that same loan over 50 years, and the payment drops to $2,452. That $319 monthly savings looks attractive until you do the full calculation.

Over three decades, you’d pay roughly $547,000 in interest to your lender. Switch to a 50-year term? The total interest balloons to approximately $1.02 million—nearly double. The real cost of that “affordable” payment is nearly half a million dollars in additional interest that flows directly into the financial system.

This is where understanding self-amortizing mortgages becomes crucial. Early in any loan’s life, most of your payment goes toward interest rather than building equity in your home. With a 50-year structure, this imbalance extends dramatically, meaning homebuyers would spend decades accumulating wealth at a glacial pace while banks harvest interest income at an accelerating rate.

The Real Winners: Banks and Mortgage REITs

Large commercial banks like Bank of America and Citigroup would be positioned to capitalize on this shift immediately. Their scale allows them to distribute risk across thousands of mortgages nationwide, while their brand power ensures they’d attract sufficient customers to originate massive volumes of these longer-term loans.

But there’s a more sophisticated beneficiary: mortgage real estate investment trusts (mREITs) such as Annaly Capital and AGNC Investment Corp. These funds purchase pooled mortgage securities and profit from the spread between their borrowing costs and the interest they earn. Investors flock to them for their extraordinary yields—currently hovering around 12.7% for Annaly and nearly 14% for AGNC.

Here’s where 50-year mortgages transform the mREIT landscape. The self-amortizing nature of mortgages means a portion of each interest payment actually represents principal repayment. This creates a drag on mREIT valuations over time, as they’re essentially returning capital to shareholders while their portfolios depreciate. AGNC’s tangible net book value illustrates this perfectly: it started 2020 at $17.66 per share but had eroded to $8.28 by Q3 2025.

Longer mortgage terms would dramatically alter this equation. With 50-year mortgages, interest would comprise a much larger share of total cash flows for decades, meaning less capital return embedded in dividends. The net tangible benefit for mREIT shareholders? Their portfolio values would decline more slowly, making these already high-yielding investments even more attractive to income-focused investors.

A Regime Shift for Financial Markets

While it remains uncertain whether 50-year mortgages will move from proposal to policy, the financial incentives are crystal clear. The lenders—whether traditional banks or sophisticated mREIT investors—would capture an enormous wealth transfer from borrowers. For financial stock traders, a 50-year mortgage regime could fundamentally rerate the attractiveness of mortgage-backed securities and the institutions that hold them.

The question isn’t whether this benefits the financial sector. It absolutely does. The real question is whether policymakers recognize they’re essentially subsidizing bank profits at the expense of homebuyer equity accumulation over the next half-century.