The case for a 40-year mortgage

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

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

To address this, I propose a bold new approach: a 40-year mortgage using the Federal Home Loan Bank (FHLB) system as a 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 home ownership more affordable 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. But 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 potentially locking in an affordable market rate, making home ownership accessible to a wider segment of the population.

There is 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 approaching 80 years, a 40-year period better aligns with modern reality.

Critics may argue that a longer mortgage term increases the total interest paid, but the benefits of affordability and access outweigh this disadvantage. For many, the alternative is indefinite renting, which does not build equity and leaves families vulnerable to rising rents and financial displacement. A 40-year mortgage allows more people to start building equity sooner, offering a path to long-term financial stability and sustainable human dignity—a key element of the American Dream. A Path Up the Repaired Economic Ladder of Ambition 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 program. By leveraging FHLB’s established infrastructure and network of regional banks, this program can be effectively implemented nationwide. The FHLB’s participation ensures that the program builds on a strong, federally supported framework, promoting stability in the housing market and tailoring solutions to meet the diverse needs of communities, from rural areas to large urban markets.

To further support first-time home buyers, I am proposing federal mortgage interest subsidies of between 3.5% and 4.5% for those who complete certified financial literacy training. Subsidies will be capped at $350,000 for rural mortgages and $1 million for urban markets, reflecting the varying costs of home ownership across the country.

Financial literacy education equips first-time buyers with the skills needed to effectively manage finances, avoid aggressive borrowing, and make informed decisions about home ownership. By linking subsidies to this education, 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 home ownership creates a ripple effect that boosts the broader economy. Home ownership drives consumer spending as new homeowners invest in furniture, appliances, home improvements and other goods and services, supporting jobs and contributing to GDP growth.

Additionally, home ownership promotes community stability. Homeowners are more likely to invest in their neighborhoods, leading to safer, more vibrant communities, which in turn attract businesses, boost property values ​​and create a positive feedback loop that benefits everyone. Neighborhoods with higher homeownership rates also tend to have higher credit scores, stabilizing communities, reducing crime and supporting families.

A 40-year mortgage program can also address America’s growing wealth gap. Home ownership has historically been one of the most effective ways for families to build wealth. By making homeownership more affordable, especially for young people, minorities, and those in rural areas, we can promote a more equitable distribution of wealth and help close the economic gap. This approach also addresses social justice concerns, particularly for historically marginalized communities such as African Americans, where the homeownership rate lags at 45 percent compared to 75 percent for white Americans. Bridging the home ownership gap can help bridge the wealth gap by promoting social justice through an economic lens.

This proposal is not just about expanding home ownership. it is about promoting sustainable economic development. By making home ownership possible for more Americans, we are laying 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 economic sustainability goals. By focusing on financial literacy and responsible lending, we can avoid past pitfalls like the 2008 housing crisis by building an inclusive, stable, and growth-oriented housing market.

The introduction of a 40-year mortgage, backed by the FHLB system and bolstered by federal subsidies tied to financial literacy, represents a powerful tool to expand home ownership in America. This approach offers a sustainable path to economic growth, community development and wealth creation. By making home ownership more affordable, we can ensure that the American Dream remains attainable for generations to come, leading to prosperity and stability in our economy.

Now is the time for bold action. By rethinking our approach to home ownership, 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 the founder and CEO of Operation HOPE, a nonprofit financial insights company. He is a member of it CNBC Global Financial Wellness Advisory Board and the CNBC CEO Council.