A 40-year mortgage is like a traditional 15- or 30-year mortgage, but it offers an extended repayment term. Having ten more years to pay off a loan can give you lower monthly payments, but in the long term you’ll pay far more interest.
40-year mortgages can be a more affordable way to purchase a home in today’s increasingly expensive housing market, but that’s not the most common way they’re used. More often, lenders modify an existing loan’s repayment term to 40 years in order to help struggling homeowners avoid foreclosure.
Getting a home loan with a 40-year term is an option that more buyers are considering as home prices continue rising faster than incomes While 30-year mortgages have traditionally been the most popular choice, the lower monthly payments of a 40-year loan can help make homeownership attainable for more buyers
In this comprehensive guide, we’ll explain everything you need to know if you’re wondering, “can I get a 40 year mortgage?” Below, we’ll cover:
- What is a 40-year mortgage
- Pros and cons of 40-year loans
- How to qualify for a 40-year mortgage
- Where to get a 40-year home loan
- Alternatives to consider
- And more
What Is a 40-Year Mortgage?
A 40-year mortgage is a home loan with a repayment term of 40 years. This is 10 years longer than the 30-year mortgages that have long been the most common choice for homebuyers.
With a 40-year loan, you’d make 360 monthly payments over 40 years to fully pay off the loan, compared to just 360 payments over 30 years with a traditional 30-year mortgage.
40-year mortgages can be fixed-rate or adjustable-rate Their key appeal is that stretching out the repayment period results in lower monthly payments However, you’ll pay more interest over the life of the loan.
The Pros of 40-Year Mortgage Loans
There are some potential benefits to choosing a 40-year mortgage over a shorter-term loan:
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Lower monthly payments – The main draw of a 40-year loan is that it offers lower monthly payments than 30-year or 15-year mortgages of the same loan amount. This increased affordability could make homeownership possible for more buyers.
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Buy more house – The lower monthly payments free up more of your income to qualify for a larger loan amount. This allows you to buy a more expensive home than you may have been able to afford with a 30-year mortgage.
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Interest-only period – Some 40-year loans offer an interest-only period at the beginning of the loan. You only pay the interest charges and don’t pay down principal during this time. This further reduces payments in the early years.
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Payment flexibility – If your loan has an interest-only period, you have flexibility in the first years to pay only the required interest amount, pay down principal, or pay extra toward principal. This allows you to manage other expenses.
The Cons of 40-Year Mortgage Loans
While they can expand homebuying budgets, 40-year mortgages also come with some potential disadvantages:
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Higher interest rates – Lenders typically charge higher interest rates on 40-year loans than 30-year ones. The longer repayment timeline increases the lender’s risk.
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More interest paid – Even if you get the same rate, you’ll pay significantly more interest over the 40-year term than with a shorter 30-year loan.
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Slower equity building – You build home equity more slowly over 40 years. It takes longer to build the 20% equity needed to drop mortgage insurance or tap home equity.
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Limited availability – Most big lenders don’t offer 40-year mortgages. You’ll have to shop around with smaller lenders to find this option.
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Higher fees – 40-year loans often come with higher origination fees and closing costs than traditional mortgages.
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Prepayment penalties – Some 40-year mortgages impose prepayment penalties if you refinance or pay off the loan early.
So in short, the trade-off is lower monthly payments in exchange for higher long-term costs. You have to run the numbers carefully to see if it’s the best option.
How to Qualify for a 40-Year Mortgage
Qualifying for a 40-year home loan is similar to other mortgages, with a few key differences:
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Minimum credit scores – Expect 40-year mortgages to require credit scores of at least 620, but often 640 or higher. Requirements vary by lender.
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Income and debt – Lenders review your income, debts, and other factors to ensure you can afford the monthly payments long-term. Qualifying is generally a bit easier than shorter-term loans.
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Down payment – Smaller down payments around 3-10% are often allowed since the lower payments increase affordability. But 20% or more down is ideal to get a better rate.
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Home appraisal – The home still needs to appraise for at least the purchase price to ensure the lender can recoup their investment if you default.
Be sure to compare multiple lender quotes to find the best 40-year mortgage rates and terms for your situation. Rates can vary significantly between lenders.
Where Can You Get a 40-Year Home Loan?
Since they are niche products, 40-year mortgages aren’t as widely available as traditional 15- or 30-year home loans. Here are some places to look for them:
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Online lenders – Many online lenders offer 40-year mortgages since they have the technology platform to support niche products. They may offer the most competitive rates.
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Mortgage brokers – Brokers can shop your application to lenders that offer 40-year loans. This saves you time instead of contacting lenders individually.
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Local banks and credit unions – Community banks and credit unions sometimes offer 40-year mortgages, but usually only for their existing customers.
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Jumbo loan lenders – A few lenders that provide jumbo mortgages above the conforming loan limit also offer 40-year loan options.
Getting quotes from multiple lenders ensures you find the right 40-year loan program at the lowest rate and with the best terms.
Alternatives to Consider Over 40-Year Mortgages
While a 40-year term can make homeownership more affordable, it comes at a steep price over the long run. Here are a few alternatives to consider:
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30-year fixed mortgage – Opt for a 30-year loan, make a higher down payment if possible, and buy a little less house. This results in much lower total interest costs.
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Mortgage points – Pay points upfront to buy down the interest rate on a 30-year loan. This also reduces monthly payments but with fewer extra interest charges.
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15-year fixed mortgage – Make extra efforts to qualify for a 15-year mortgage. The higher monthly payments are offset by much lower total interest and faster equity building.
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ARM loan – Get a 5/1 or 7/1 adjustable-rate mortgage with a fixed period matching how long you plan to stay in the home. You benefit from lower initial rates before they adjust.
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FHA or VA loan – Opt for an FHA or VA-backed loan if eligible. They offer lower down payments, looser qualifying, and better rates than 40-year options.
Run the numbers for yourself and talk to a loan officer to weigh your mortgage alternatives beyond just taking a 40-year term.
The Bottom Line
While you can get a mortgage with a 40-year repayment term, it comes at the cost of higher rates, massive extra interest expenses, and slower equity building compared to a traditional 30-year home loan.
But for some buyers, the lower monthly payments may be the only way they can swing homeownership right now. Just be sure to run the numbers carefully and shop multiple lender options to find the best 40-year mortgage program if you need one.
Frequently Asked Questions about 40-Year Mortgages
How much more interest do you pay with a 40-year vs 30-year mortgage?
On a $300,000 loan amount with a 5% interest rate, you would pay around $185,000 more in interest over the loan term by going with a 40-year mortgage instead of a 30-year one. The longer timeframe leads to tens of thousands more in interest charges.
Can you get a 40-year FHA loan?
No, FHA loans backed by the Federal Housing Administration only come in 15-year and 30-year terms. FHA does not insure mortgages with longer 40-year terms.
Do mortgage lenders offer 40 year mortgages?
Most large, mainstream lenders like Chase, Wells Fargo, and Citi don’t offer 40-year mortgage options. You’ll have to check with smaller lenders like online lenders, local banks and credit unions to find a 40-year home loan.
Can you get a 40 year VA mortgage?
No, VA mortgages guaranteed by the U.S. Department of Veterans Affairs are not available with 40-year terms, only 15-year and 30-year repayment options. VA does not back loans with longer than 30-year terms.
How to get a 40-year mortgage
The process to get a 40-year mortgage at the time of purchase (not as a loan modification) is very similar to what you’d do to get a 30- or 15-year loan. But there are a few differences to keep in mind:
- The minimum requirements to qualify vary. Nonqualified mortgages don’t have the same minimum mortgage requirements as traditional loans and they can vary from lender to lender. Non-QM lenders have wide leeway to decide what minimum credit scores, loan-to-value (LTV) ratios and debt-to-income (DTI) ratios they will accept.
- There are limited lenders you can choose from. Because 40-year purchase loans aren’t widely available, you may need to do some extra research or go through a mortgage broker to find a lender. But before settling on one, make sure you’re working with a reputable lender. Most legitimate lenders are listed in the NMLS loan originator database.
Beware: 40-year loans are seen as risky The CFPB considers all of these loan types to be risky for borrowers. 40-year fixed mortgage rates may also be higher than loans with shorter terms. But even if they don’t carry a higher interest rate, the 10-year difference in the two loan terms can cost borrowers a huge amount in interest over the life of the loan (more on this below).
| Pros | Cons |
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Lower monthly payments. The payment on a 40-year mortgage is more affordable than a 30-year mortgage with the same loan amount. Increased buying power. The extended payment term and lower monthly payments of a 40-year mortgage may allow some buyers to purchase more expensive homes. More flexibility. Loans with an initial period in which you only pay interest can allow a little more flexibility at the beginning of your loan term. This can be a nice feature if you find yourself grappling with the high costs of moving into, furnishing or fixing up a new home. |
Higher interest rates. Mortgages with longer terms can have higher interest rates than loans with shorter terms. Harder to find. Not all lenders offer 40-year home loans because they’re not a mainstream mortgage product. Can be risky. If the 40-year loan has unusual components, such as an interest-only period, negative amortization or a balloon payment, you could be taking on significant risk. Can negatively affect credit. A mortgage modification can affect your credit. Equity builds slowly. With a 40-year mortgage you’ll build equity at a slower pace because the loan term is drawn out. Higher total loan costs. A 40-year mortgage will have a higher total cost than shorter-term mortgages. |