40-Year Mortgages Have Lower Payments. But There’s a Big Catch

A photo to accompany a story about 40-year mortgages Twenty20

We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

Sometimes, having more time to pay off your mortgage is the difference between making or breaking your monthly budget.

For some, that means looking into a 40-year mortgage instead of a 15- or 30-year loan, which are much more common. 

Finding lenders that offer 40-year mortgages probably won’t be easy, since not many lenders offer them. But because  the terms are longer, these mortgages offer lower monthly payments, which can make them more appealing for first-time buyers. 

Pro Tip

To be eligible for a 40-year mortgage, you need a good credit score, a solid down payment, and a stable career with sufficient regular earnings.

However, lower monthly payments come at a steep cost: You’ll pay much more in interest over the life of the loan than you would with a 30-year mortgage. On top of that, 40-year mortgage rates tend to have higher interest rates than 30-year mortgages. 

Here’s what to know about how 40-year mortgages work, what are the pros and cons, and where to get a 40-year mortgage loan.

What Is a 40-year Mortgage?

A 40-year mortgage is a home loan with a repayment term of 40 years (480 months). Most mortgage loans are repaid over 15 or 30 years. In fact, 90% of home mortgages come with a 30-year term, according to Freddie Mac.  

Those who choose a 40-year mortgage typically do so because the monthly payments are lower, providing a more affordable route to purchasing a home in the short term. 

How Does a 40-year Mortgage Work?

In general, 40-year mortgages are similar to 15- and 30-year mortgages. They’re offered by banks and credit unions, charge varying fees, have set loan terms, and fixed or adjustable rate APRs. 

Borrowers who choose a 40-year loan with a fixed interest rate pay the same amount every month toward their principal and interest. Those who opt for a 40-year mortgage with an adjustable-rate pay a fixed rate for a set period, usually between five and 10 years, before the rate adjusts.

There are also 40-year balloon mortgage loans, which allow you to take advantage of lower monthly payments for several years before having to pay a large lump-sum when the loan comes due. Or, you can pick a 40-year mortgage for which you pay only interest for a particular period before your payments go toward both principal and interest.

Pros and Cons of a 40-year Mortgage

The main advantage of a 40-year mortgage is you get to keep more money in your pocket every month, according to Jeremy Sopko, CEO of Nations Lending in Independence, Ohio. “Your monthly payments will indeed be lower because you’re stretching out the repayment terms over 40 years,” he says.

Ryan Shuchman, an investment advisor and partner at Southfield, Michigan-based Cornerstone Financial Services, explains that 40-year mortgages appeal to those with their eye on the bottom line. “For example, a 40-year loan of $250,000 at 3.25% will have a payment of $931 a month. The same terms on a 30-year mortgage will be $1,088, or $157 more a month,” notes Shuchman. “So a 40-year loan could allow a family on a tight budget to achieve homeownership.”

Loan TermBeginning BalanceInterest RateMonthly PaymentTotal Interest PaidTotal Mortgage Cost
40-Year Mortgage$250,0003.25%$931$197,051$447,051
30-Year Mortgage$250,0003.25%$1,088$141,685$391,685

Paul Miller, CPA, owner of Miller & Company, LLP in New York City, agrees. “A 40-year mortgage can get your foot in the door, especially if you want a bigger or more expensive home and are looking to get more for your money,” says Miller.

The major downside of a 40-year mortgage: You’ll pay more in total costs over the life of the loan. For one thing, paying off a mortgage more slowly means more of your payments go toward interest. Also, you’ll likely be charged a higher interest rate for the privilege of spreading out your term over 40 years compared to a 30-year mortgage

Another drawback? You’ll build equity in your home much more slowly. Consider that if you refinance the loan or sell your home before the 40 years are up, you’ll have earned less equity than if you had done so with a shorter-term loan, says Shuchman.

40-Year vs. 30-Year Mortgage

The main difference between a 40-year and a shorter-term mortgage loan is the length of time it will take you to pay off the loan in full.

“The biggest benefit to a longer-term loan is a lower monthly payment,” says Sopko. “You are spreading out those payments over a longer period of time, and therefore there is more time to pay off the debt. This means a lower monthly bill.”

However, these advantages come with a steep price.

“It’ll take you longer to pay off the debt. And, if you choose not to make any additional payments, you’ll spend significantly more money over the life of the loan because you’re paying a higher interest rate and making more payments,” Sopko cautions.

How to Get a 40-year Mortgage

Truth is, not every lender offers a 40-year mortgage loan. Plus, it may be trickier to qualify for one. “They aren’t widely offered, many mortgage programs don’t support them, and you’ll need exceptional credit in most cases. It’s harder to get a 40-year loan than it is a traditional 10-, 20-, or 30-year loan,” explains Sopko.

So before you apply for a 40-year mortgage, make sure to review your credit profile and where you are financially.. “Lenders have tightened their lending criteria. You have to show that you make enough money to afford the house,” says Miller.

Also, you won’t be able to get a 40-year mortgage if you’re applying for a government-backed loan, such as an FHA, USDA, or VA loan

To find 40-year mortgage providers, search and shop around carefully online and consult an independent mortgage broker, recommends Shuchman.

Is a 40-Year Mortgage Right For You?

Before applying for a 40-year loan, make sure you understand exactly how much it’s going to cost you. “You will, without a doubt, spend more money on your home purchase if you take the full 40 years to pay down the debt,” Sopko says. “Yes, the monthly payments are lower, but you will spend more over the long haul.”

For these and other reasons, Shuchman believes 40-year mortgages aren’t worth it.  “Most mortgages are paid off between five and seven years into the life of the loan. Given this perspective, most borrowers should instead use 30-year products and obtain the lowest possible rate and loan costs,” he says.