40-Year Mortgage: What It Is, Pros, and Cons

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When you’re comparing home loans, it’s a good idea to look at all your options. That includes some of the less common options, such as a 40-year mortgage.

A 40-year mortgage comes with lower payments compared to shorter-term loans, which could help you afford a higher-priced home or better afford the monthly bill. But the extended term means you’ll typically pay more interest over the long haul.

Here’s what you need to know about 40-year mortgages and how they stack up to their shorter-term counterparts:

What is a 40-year mortgage?

A 40-year mortgage is a home loan with a repayment term of 40 years. As long as you follow the payment schedule, you’ll pay off the loan within 480 months.

Because of the longer timeline on a 40-year mortgage, the monthly payments are smaller and you’ll typically pay more in interest compared to a shorter-term mortgage.

Can you get a 40-year mortgage?

Yes, it’s possible to get a 40-year home loan. Mortgages generally range from 10 to 30 years, and some stretch to 40 years. However, not all lenders offer 40-year home loans because they’re not considered “qualified mortgages.”

Qualified mortgages follow a set of rules that help ensure borrowers can afford their home loans. One such rule is that qualified mortgages can’t have loan terms longer than 30 years. As such, a 40-year mortgage is considered a non-qualified mortgage (sometimes referred to as a non-QM loan).

If you already have a home loan and are experiencing a financial hardship, you might be able to lengthen the term as part of a loan modification.

For instance, the Flex Modification program allows qualified borrowers to extend their repayment term to 40 years, lower their interest rate, and place a forbearance on part of the principal balance. The program is available to people with conventional loans owned by Fannie Mae and Freddie Mac, FHA loans, VA loans, and USDA loans.

Where can I get a 40-year mortgage?

Since they aren’t considered qualified mortgages, it might be difficult finding lenders that offer 40-year home loans, but it’s not impossible.

First check with a lender you already have a relationship with, such as your bank or an online lender that you’ve worked with before.

If your preferred lender doesn’t offer 40-year mortgages, check out regional banks and credit unions near you. These places often have specialized loan products with flexible lending terms and are more willing to work with borrowers who have atypical incomes or credit histories.

Tip: You can also contact a mortgage broker to see if they work with lenders that offer non-qualified mortgages. Counselors at your local Housing and Urban Development office may also be able to point you in the right direction.

How to calculate a 40-year mortgage payment

To calculate the principal-and-interest payment on a 40-year mortgage, you’ll need to know the loan amount (i.e., the price of the home minus the down payment), loan term, and interest rate.

Enter your loan information to calculate how much you could pay

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With a
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An online mortgage calculator like the one above can help you figure out the monthly payment and total interest costs over the loan term. You’ll get a better idea of what your monthly payment will be if you also know the cost of your taxes and insurance.

40-year mortgage rates

A mortgage rate is based on multiple factors, such as the borrower’s creditworthiness, loan amount, down payment, and more. Lenders take on more risk with longer-term loans, so that risk is reflected in the rate. Interest rates for 40-year home loans are typically higher than rates on shorter-term mortgages.

Pros and cons of a 40-year mortgage

When you’re considering a 40-year mortgage, it’s important to weigh the benefits and drawbacks.

Pros of a 40-year mortgage

  • Lower monthly payments: Because the loan term stretches over a longer period, your mortgage payments will be lower on a 40-year mortgage compared to a shorter-term loan. That’s assuming the other details of the loan, such as the interest rate and loan amount, are the same on both.
  • More buying power: The lower monthly payments that come with an extended loan term can help you qualify for a larger loan amount. So you may be able to afford a higher-priced home using a 40-year mortgage.
  • May help you get back on track: A loan modification that extends your loan term to 40 years could help if you’re struggling after a financial setback. Although you’ll pay more interest, the lower payments may help you better afford the mortgage and keep your home.

Cons of a 40-year mortgage

  • Higher interest rate: Lenders generally take on more risk with longer-term loans and price them accordingly. That means interest rates on 40-year mortgages are often higher compared to 15-year or 30-year mortgages. The exact difference in mortgage rates varies with each lender.
  • Equity builds slowly: When you take out a mortgage loan, the amortization schedule spells out how much of each payment goes to interest and how much goes to the principal. In the beginning of the loan term, more of your payment goes toward interest. This gradually shifts in the other direction as the loan progresses. So with a longer loan term, your equity builds at a slower pace.
  • Higher total cost: Because of the higher interest rate and longer loan term, you’ll typically pay more interest over the life of the loan on a 40-year mortgage.
  • Harder to find: A 40-year home loan isn’t considered a qualified mortgage, so it may be harder to find lenders that offer them.

How to get a 40-year mortgage

The process for getting a 40-year mortgage is similar to that of a shorter-term loan, starting with finding lenders that offer them.

But, because these are non-qualified mortgages, some lenders don’t include 40-year mortgages in their suite of options. They’re also not available through government-backed programs such as FHA loans and VA loans.

Once you find a few lenders that offer 40-year mortgages, compare offers and check eligibility requirements to see if you qualify. The lender you choose can guide you through the application process. Typically, you’ll need to agree to a credit check and provide the same financial information as you would with any mortgage.

Tip: If you qualify, the lender should give you a Loan Estimate that lists terms such as the interest rate, annual percentage rate (APR), monthly payment, and other details. Make sure you understand everything on this document before closing on the loan.

30- vs. 40-year mortgage

The loan term on a mortgage impacts how much you’ll pay each month and over the life of the loan.

Here are the major differences between 30-year and 40-year loan terms:

  • The monthly payment is generally higher on a 30-year mortgage.
  • A 40-year mortgage typically comes with a higher interest rate.
  • You’ll likely pay more interest over the life of a 40-year mortgage because of the longer term.

To check the cost of both loan terms, it helps to look at them side by side. Let’s say you take out a home loan for $250,000 at 3% interest and make a 20% down payment. Here’s how the principal and interest payments would break down:

  30-year mortgage 40-year mortgage
Monthly principal and interest payment $843 $716
Interest paid over life of the loan $103,555 $143,665
Difference +$40,110 more in interest

40-year mortgage refinance

If you want to lower the payments on your existing home loan, your lender may be willing to refinance into a 40-year loan term. This might help you better afford the mortgage from month to month.

But just know that your payoff timeline and total interest costs will increase when you refinance into a 40-year mortgage, and you’ll need to account for closing costs. These factors cost you more in the long run. So, if you choose to refinance into a 40-year loan, consider making higher principal payments later on when you can afford to do so.

Learn: How to Refinance Your Mortgage in 6 Easy Steps

40-year mortgage alternatives

Because a 40-year mortgage may be more expensive in the long term, it’s a good idea to consider alternatives first. Some options include:

  • 30-year conventional mortgage: Depending on the interest rate and loan amount, the monthly payment on a 30-year mortgage may not be much higher than one on a 40-year loan. A 30-year mortgage is also easier to find as virtually every conventional mortgage lender offers them.
  • FHA loan: Mortgages backed by the Federal Housing Administration come with loan terms between 15 and 30 years. An FHA loan may be an affordable alternative to a 40-year home loan because they generally have lower interest rates compared to conventional loans, and the down payment and credit score requirements are lenient.
  • ARM: An adjustable-rate mortgage (ARM) comes with an interest rate that may change over time. For instance, the interest rate on a 10/1 ARM is fixed for the first 10 years of the loan. After the fixed period ends, the interest rate can adjust once a year for the remaining loan term.
  • Interest-only loans: With this type of mortgage, you’ll only pay the interest due on the loan for a set period of time, typically the first five to 10 years. After the interest-only period ends, the principal is added and your payments increase.

Keep Reading: How to Get the Best Mortgage Rates

About the author

Kim Porter

Kim Porter

Kim Porter is an expert in credit, mortgages, student loans, and debt management. She has been featured in U.S. News & World Report, Reviewed.com, Bankrate, Credit Karma, and more.

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