Op-ed: The case for a 40-year mortgage

Homeownership has long symbolized the American Dream, embodying stability, wealth creation, and community investment.

Yet, for millions of Americans, especially younger generations and first-time homebuyers, that dream is slipping away. Rising home prices, stagnant wages, and restrictive mortgage terms have made it increasingly difficult to take that crucial first step onto the property ladder.

To address this, I propose a bold new approach: a 40-year mortgage using the Federal Home Loan Bank (FHLB) system as the framework, with federal subsidies for first-time homebuyers who complete financial literacy training.

This concept combines extended mortgage terms with financial education and targeted subsidies, making homeownership more accessible while driving sustainable economic growth.

The 30-year mortgage has been the American standard for decades, balancing affordable monthly payments with a reasonable repayment period. However, as home prices soar and interest rates rise, particularly in urban areas, even 30-year mortgages can leave many families struggling with unaffordable payments. A 40-year mortgage would lower monthly payments by extending the repayment period and possibly locking in an affordable market rate, making homeownership accessible to a broader segment of the population.

There’s no magic in the 30-year mortgage term — it was born during the Great Depression when life expectancy was also around 60 years. Today, with life expectancy nearing 80 years, a 40-year term aligns better with modern realities.

Critics may argue that a longer mortgage term increases the total interest paid, but the benefits of affordability and access outweigh this drawback. For many, the alternative is indefinite renting, which builds no equity and leaves families vulnerable to rising rents and economic displacement. A 40-year mortgage allows more people to begin building equity sooner, offering a pathway to long-term financial stability and sustained human dignity — a key element of the American Dream. A pathway up the repaired economic aspirational ladder in America.

The FHLB system, a government-sponsored enterprise that provides liquidity to member financial institutions, is the ideal vehicle for implementing this 40-year mortgage plan. By leveraging FHLB’s established infrastructure and network of regional banks, this program can be efficiently rolled out nationwide. The FHLB’s involvement ensures the program is grounded in a robust, federally backed framework, promoting stability in the housing market and tailoring solutions to meet the diverse needs of communities, from rural areas to major urban markets.

To further support first-time homebuyers, I propose federal subsidies for mortgage rates between 3.5% and 4.5% for those who complete certified financial literacy training. Subsidies would be capped at $350,000 for rural mortgages and $1 million for urban markets, reflecting the varying costs of homeownership across the country.

Financial literacy training equips first-time buyers with the skills needed to manage finances effectively, avoid predatory lending, and make informed decisions about homeownership. By tying subsidies to this training, we incentivize responsible borrowing and invest in the financial health of future generations.

The benefits of this proposal extend beyond individual homeowners. Expanding access to homeownership creates a ripple effect that stimulates the broader economy. Homeownership drives consumer spending as new homeowners invest in furniture, appliances, home improvements, and other goods and services, supporting jobs and contributing to GDP growth.

Moreover, homeownership fosters community stability. Homeowners are more likely to invest in their neighborhoods, leading to safer, more vibrant communities, which in turn attracts businesses, enhances property values, and creates a positive feedback loop benefiting everyone. Neighborhoods with higher homeownership rates also tend to have higher average credit scores, stabilizing communities, lowering crime, and fostering families.

A 40-year mortgage program can also address the growing wealth gap in America. Homeownership has historically been one of the most effective ways for families to build wealth. By making homeownership more accessible, particularly for young people, minorities, and those in rural areas, we can promote more equitable wealth distribution and help close the economic divide. This approach also addresses social justice concerns, particularly for historically marginalized communities like African Americans, where the homeownership rate lags at 45% compared to 75% for white Americans. Bridging the homeownership gap can help close the wealth gap, advancing social justice through an economic lens.

This proposal is not just about expanding homeownership; it’s about fostering sustainable economic growth. By making homeownership attainable for more Americans, we lay the foundation for a more resilient economy. Homeowners are more likely to save, invest in their communities, and contribute to economic stability.

Furthermore, this approach aligns with broader goals of economic sustainability. By focusing on financial literacy and responsible lending, we can avoid past pitfalls like the 2008 housing crisis, building a housing market that is inclusive, stable, and growth-oriented.

The introduction of a 40-year mortgage, supported by the FHLB system and bolstered by federal subsidies tied to financial literacy, represents a powerful tool for expanding homeownership in America. This approach offers a sustainable pathway to economic growth, community development, and wealth creation. By making homeownership more accessible, we can ensure that the American Dream remains within reach for generations to come, driving prosperity and stability in our economy.

Now is the time for bold action. By rethinking our approach to homeownership, we can build a stronger, more inclusive, and more resilient American economy. Let’s seize this opportunity to make homeownership a reality for all Americans and recognize financial literacy as the civil rights issue of this and future generations — a win for all Americans.

— John Hope Bryant is an entrepreneur and founder and CEO of Operation HOPE, a nonprofit provider of financial literacy. He is a member of the CNBC Global Financial Wellness Advisory Board and the CNBC CEO Council.