What Is a 40-Year Fixed Mortgage?

In this article:

• What is a 40-Year Fixed Mortgage?
• Advantages of a 40-Year Fixed Mortgage
• Disadvantages of a 40-Year Fixed Mortgage

What is a 40-Year Fixed Mortgage?

Similar to the common 30-year fixed mortgage loan, a 40-year fixed loan allows you to amortize the loan an additional 10 years so that you are paying off your loan over a 40-year time period.

A 40-year fixed mortgage is a mortgage that has a specific, fixed rate of interest that does not change for 40 years.

If you choose a 40-year fixed mortgage, your monthly payment will be the same every month for 40 years. However, the breakdown of how much of your mortgage payment goes to principal and how much goes to interest will shift throughout the lifetime of the loan. Your payments will be spread over 40 years, with the interest payments making up the majority of the payment at the beginning, and then principal paid off toward the end of the term.

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Advantages of a 40-Year Fixed Mortgage

• 40-year fixed mortgages can allow borrowers to purchase a more expensive home for the same monthly payment as a 30-year fixed payment.
• Alternatively, a 40-year fixed mortgage could allow the borrower to have a lower monthly payment than a traditional 30-year fixed mortgage for the same house purchase price.
• Might be good option if you plan on staying in a house indefinitely.
• Might be the only way for some borrowers to qualify for a large mortgage if interest rates are higher.
• High income earners might be interested in the tax advantage of writing off the large amount of mortgage interest that occurs with a 40-year fixed mortgage.
• Your rate is fixed for 40 years, even if interest rates go way up, your rate is locked in.

You can use our affordability calculator and select the program rate of a 40-year term to see how much more house you can afford if you went with a 40-year loan versus a 30-year loan:

Disadvantages of a 40-Year Fixed Mortgage

• Not all lenders offer 40-year fixed mortgages.
• Slightly higher interest rate than a 30-year fixed mortgage.
• You often stretch your budget, so you may be borrowing more money overall than a 30-year fixed loan.
• You build equity more slowly because most of your monthly mortgage payment is going toward interest.
• You will pay more interest over the lifetime of a loan than with a 30-year fixed loan.
• Most people typically refinance or sell their homes after X number of years, therefore negating the positive advantages of obtaining a 40-year fixed loan.

Contact a lender today to see if they offer 40-year fixed mortgages.

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