A Guide To 40-Year Mortgages: Pros, Cons, And Alternatives

Mortgage Dove

A Guide To 40-Year Mortgages: Pros, Cons, And Alternatives

Houses are where we settle, hang out, and feel safe, but they can be expensive. Making a house cheaper can happen by extending the loan term, like a 40-year mortgage. Still, there are downsides to think about, too.


Can You Get a 40-Year Mortgage?

Sure, some banks give out 40-year mortgages. But before we dive deeper, let's cover the basics first.

What's a 40-Year Mortgage?

A 40-year mortgage means it takes 40 years to pay off your house if you make regular payments without paying extra to finish early. Usually, mortgages are between 8 to 30 years long.

Sometimes, a 40-year loan might have different parts. At the start, you may only pay interest for a while before paying both the main loan and interest for the rest of the time.

How Does a 40-Year Home Loan Work?

A 40-year home loan can be a fixed-rate mortgage where you pay the same monthly amount (not including taxes and insurance). Or it can be an adjustable-rate mortgage (ARM) that starts at a low fixed rate for a few years before changing based on an index.

You can refinance a 40-year mortgage into a different term later on.

Some people like 40-year loans because they mean lower monthly payments over a longer time. Some lenders might let you put down less money upfront.

Why Are 40-Year Mortgages Rare?

40-year mortgages aren't like standard loans regulated by certain rules set by the Consumer Financial Protection Bureau (CFPB). Suppose a mortgage lasts longer than 30 years or includes risky features. In that case, it doesn't fit the criteria of what's known as a "qualified mortgage."

These guidelines from the CFPB ensure that lenders aren't giving out home loans that might put borrowers in financial trouble.

Also, 40-year mortgages are separate from the typical loans that follow Fannie Mae and Freddie Mac's rules for regular mortgages. This is why getting a 40-year conventional loan is quite unusual unless you can prove you're facing financial difficulties and need it as a modification option for your loan.

Which Lenders Have 40-Year Mortgages?

Not all lenders offer 40-year mortgages because these loans aren't backed by the usual parties. You might find them from portfolio lenders or those with connections to different kinds of investors. Portfolio lending means the lender keeps the loan until it's fully paid rather than selling it off.

But, it's rare for lenders to keep loans these days because they prefer having more money available. Most loans get sold to big investors right away. That's why finding a place offering a 40-year mortgage is tricky. Still, you can try checking with:

  • Mortgage brokers
  • Online lenders
  • Local banks
  • Private lenders
  • Credit unions


Pros and Cons of a 40-Year Mortgage

Here are the advantages and disadvantages of having a 40-year mortgage.


  • Lower Monthly Payments

Paying less monthly compared to a 30-year mortgage with the same loan amount.

  • Increased Purchasing Ability

With lower monthly payments and a longer payback time, some buyers can afford pricier homes.

  • More Flexibility

Some loans offer an initial period where you only pay interest, giving a bit of leeway at the start of the loan, which is helpful for initial home expenses.


  • Higher Interest Rates

Longer-term mortgages tend to have higher interest rates than shorter-term options.

  • Limited Availability

Not all lenders offer 40-year home loans since they're not as common.

  • Potential Risks

Unusual components like interest-only periods, negative amortization, or balloon payments can pose significant risks.

  • Impact on Credit

Mortgage modifications can negatively affect your credit score.

  • Slow Equity Buildup

Building equity takes longer due to the extended loan term.

  • Higher Overall Loan Costs

The total cost of a 40-year mortgage is greater than that of shorter-term options.


30- Vs. 40-Year Mortgages

Let’s compare 30-year and 40-year mortgages. Some differences are apparent, like the 40-year term being 10 years longer to pay off. This means spending more time on payments.

A 40-year mortgage usually leads to lower monthly payments because the total amount is spread over a longer period than a 30-year term.

However, with a 40-year mortgage, you'll pay more in interest over the loan's life. Additionally, these mortgages might have higher interest rates due to the longer payoff time, which can affect the overall cost compared to a 30-year mortgage.


Other Options Instead of a 40-Year Mortgage

Before choosing a 40-year mortgage, look into these alternatives:

  • Mortgage Points

Buying points upfront to lower monthly payments can work well if you want to pay less each month.

Sometimes, a 30-year loan might not have much higher payments than a 40-year one, primarily based on the loan amount and interest rate. You can also aim for a slightly cheaper house to make a 30-year loan more affordable.

These loans offer low-interest rates, minimal down payment requirements, and more relaxed credit criteria.

  • USDA Loan

Backed by the U.S. Department of Agriculture, these loans offer low rates and don't need a down payment. However, they're only for low to moderate-income borrowers in rural areas.

Veterans, military personnel, and eligible spouses might find these loans attractive as they don't require a down payment or mortgage insurance.

Consider an ARM if you plan to sell the house before the fixed-rate period ends.



Is a 40-Year Mortgage a Good Idea?

A 40-year mortgage could work for you, depending on your situation. With the longer term, payments are lower, making it more manageable. But remember, the higher interest rates and longer time to pay might cost more overall.

What Are 40-Year Mortgage Rates?

Rates for 40-year mortgages can be higher compared to shorter-term ones. The rate depends on your loan structure, credit score, and down payment. Some lenders might have slightly higher rates for 40-year loans, while others could have significantly higher ones.

Can You Refinance a 40-Year Mortgage?

You can refinance a 40-year mortgage, depending on your lender. Some banks and lenders offer this option during loan modifications. It’s a solution for those struggling with their mortgage payments. The lender might extend the repayment period or change terms to reduce your monthly payments.

How Much Would My Monthly Payment Be on a 40-Year Mortgage?

Using current rates and home prices, the average monthly payment for a 40-year mortgage is $1,924. To calculate your specific payment, know your interest rate and down payment, then use a mortgage calculator.


The Bottom Line

A 40-year mortgage might give you lower monthly payments since it's spread out over a long time. This also means you can be more flexible with your budget. Sometimes, you only need to pay the interest for a while.

But there's a downside, too. You'll end up paying more in interest overall, and you'll build up equity in your home more slowly. Aside from that, since it's not a typical mortgage, there could be higher fees and some not-so-great terms to be careful about.

"Mortgage Dove makes home financing convenient for every American. You can count on us to provide a home buying experience tailored to your personal needs and financial situation. We strive to give you the peace of mind that your home financing goals can be achieved.”


Other Related Articles you may be interested in