Buying a home is a big decision, and choosing the right loan can make a huge difference in your monthly payment and long-term costs. Most people go with a 30-year mortgage, but some lenders offer 40-year loans as an option. The main reason? Lower monthly payments.
But is a 40-year mortgage really the best choice? While it may seem like a good way to make homeownership more affordable, there are some important things to consider. In this guide, we’ll break down:
- What a 40-year mortgage is and how it works
- The pros and cons of a 40-year loan
- How it compares to a 30-year mortgage
- Other loan options that might work better for you
- Where you can find 40-year mortgage lenders
Let’s dive in!
What Is a 40-Year Mortgage and How Does It Work?
A 40-year mortgage is a home loan that gives you 40 years to pay it off instead of the traditional 30 years. Because the loan term is longer, your monthly payments are smaller, but you’ll end up paying more in interest over time.
These loans can have different structures, including:
- Fixed-Rate 40-Year Mortgage: Your interest rate stays the same for the entire 40 years, so your monthly payment won’t change (except for property taxes and insurance).
- Adjustable-Rate Mortgage (ARM): Your rate starts off fixed for a certain period (like 5 or 7 years) and then adjusts up or down based on the market.
- Interest-Only 40-Year Mortgage: You only pay interest for the first several years, which keeps your payments low at the start. After that, you start paying off the loan principal as well, which increases your monthly payment.
Since 40-year mortgages are not backed by government agencies like Fannie Mae or Freddie Mac, they are considered non-qualified mortgages (Non-QM). This means they may come with different rules, higher interest rates, or extra fees compared to standard 30-year loans.
How Does a 40-Year Mortgage Compare to a 30-Year Mortgage?
A 40-year mortgage gives you lower monthly payments than a 30-year loan, but you’ll pay more in total interest over time. It also takes longer to build home equity, which could impact your ability to refinance or sell your home in the future.
Here’s a side-by-side comparison:
| Feature | 30-Year Mortgage | 40-Year Mortgage |
| Loan Term | 30 years | 40 years |
| Monthly Payment | Higher | Lower |
| Total Interest Paid | Less | More |
| Interest Rate | Lower | Higher (typically) |
| Equity Building | Faster | Slower |
| Loan Type | Qualified Mortgage (QM) | Non-Qualified Mortgage (Non-QM) |
Example: Let’s compare a $225,000 loan at 4% interest.
- 30-Year Mortgage: Monthly payment = $1,074.18; Total interest = $161,706.39
- 40-Year Mortgage: Monthly payment = $940.36; Total interest = $226,373.55
That’s a difference of over $64,000 in interest paid over the life of the loan!
Pros and Cons of a 40-Year Mortgage
Pros:
✅ Lower Monthly Payments: A longer loan term spreads out payments, making your monthly cost more affordable.
✅ More Home Buying Power: Since your monthly payment is lower, you might qualify for a more expensive home.
✅ Flexible Loan Structures: Some 40-year mortgages have interest-only periods, allowing you to pay less initially and free up cash for other expenses.
✅ No Prepayment Penalty: You can make extra payments whenever you want to pay down your mortgage faster and save on interest.
Cons:
❌ Higher Interest Costs: You’ll pay significantly more interest over 40 years compared to a shorter loan term.
❌ Higher Interest Rates: Since these loans are riskier for lenders, they often come with higher rates than a 30-year mortgage.
❌ Slower Equity Growth: Because you pay less toward your principal each month, it takes longer to build equity in your home.
❌ Non-Qualified Mortgage (Non-QM) Risks: 40-year loans don’t meet Qualified Mortgage (QM) standards, meaning they may come with riskier terms like balloon payments or higher fees.
Where Can You Get a 40-Year Mortgage?
Because Fannie Mae and Freddie Mac don’t buy 40-year loans, most traditional lenders don’t offer them. Instead, you’ll need to look for:
- Mortgage Brokers – Brokers work with multiple lenders and may have access to 40-year mortgage options.
- Portfolio Lenders – Some banks and credit unions offer 40-year loans and hold them in-house rather than selling them.
- Online Lenders – A few specialized online lenders focus on Non-QM loans, which may include 40-year mortgages.
- Private Lenders – Some real estate investors and private lenders offer 40-year mortgage structures, but these often come with higher rates and fees.
Because these loans are less common, it’s important to shop around, compare terms, and carefully review the loan structure before committing.
Alternatives to a 40-Year Mortgage
If you’re considering a 40-year loan due to affordability concerns, here are some alternatives that may work better:
- FHA Loans (as low as 3.5% down, flexible credit requirements)
- VA Loans (0% down for eligible veterans and service members)
- USDA Loans (0% down for rural homebuyers)
- Adjustable-Rate Mortgages (ARMs) (Lower initial rates for 5–10 years)
- Discount Points (Pay upfront to lower your long-term interest rate)
- Buying a More Affordable Home (Smaller homes, fixer-uppers, or lower-cost areas)
Final Thoughts
A 40-year mortgage may seem appealing due to its lower monthly payments, but the long-term costs and risks often outweigh the benefits. If affordability is a concern, exploring government-backed loans or adjusting your home buying budget may be a better strategy.
Not sure which loan type is right for you? Get expert guidance tailored to your situation.