The Pros and Cons of 40-Year Mortgage Loans

Are you having trouble qualifying for the home you want because it’s slightly out of your price range?

A 40-year mortgage loan will spread your monthly payments over 40 years instead of 30, lowering your monthly payment allowing you to buy a more expensive home.

But there are some disadvantages you need to know about.

In this article, we will be discussing the pros and cons of 40-year mortgage loans so you can see if it’s right for you.

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What is a 40-Year Fixed-Rate Mortgage Loan?

A fixed-rate loan has an interest rate that is fixed and does not change for the life of the loan. The most common type of loan term is a 30-year fixed-rate mortgage.

In the last few years, shorter-term loans are becoming more popular; the 15-year and 20-year mortgage are more common today and in the past.

A short-term mortgage loan won’t work for buyers on a budget looking to stretch out their mortgage payments to afford a more expensive home.


  • Lower mortgage payment
  • Can afford a larger home
  • Good for borrowers who write off the interest paid on a mortgage


  • Higher interest rate (as much as 25%-50% higher rate than with a 30-yr loan)
  • The total cost of the loan is higher.
  • Will pay more interest than other types of loans.
  • Home equity will be built much slower.
  • An adjustable-rate mortgage loan may be a better option to get a more expensive home.

See how much home you can afford using our home affordability calculator.

Comparing 30-Year vs. 40-Year Loans

In this example, we will look at a borrower who is getting a loan for $250,000. We factored in the same amount of closing costs and interest rates; even though a 40-year mortgage will have a slightly higher rate, it’s easier to use the 5% rate for this example.

Loan 1: $250,000 – 5% rate – 30-yr loan – monthly payment $1342

Loan 2: $250,000 – 5% – 40-yr loan – monthly payment $1205

40 year mortgage vs. 30 year mortgage loan

As you can see in the chart above, you will save around $95,000 with the 30-year loan. But, the monthly payment for the 40-year mortgage is $137 less than the 30. The longer-term will save you in the short term with lower monthly mortgage payments, but a mortgage with a shorter team will be a better deal in the long run.


Your monthly mortgage payment is applied to principal and interest. With a mortgage, the majority of your monthly payments go towards interest. As the years go by, more of your payment goes towards the principal balance, known as mortgage amortization.

A 40-year home loan stretches those payments much further than 15 and 30-year loans do. This means borrowers will be paying more interest and have less of their payment go towards the principal balance.

Refinancing a 40-Year mortgage

40-year loans are for homebuyers who need to get the lowest payment and don’t mind paying more interest over a longer period of time.

But things change; if your financial situation changes and you can put more towards your mortgage each month, you’re able to refinance a loan with a shorter term and interest rate.

For homeowners who have trouble making their mortgage payments, refinancing into a 40-year mortgage could be the answer.

Talk to a mortgage lender to see if a 40-year loan is right for you.

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