40 Year Mortgages

40 Year Mortgages – Lender Options

Some home buyers are looking to keep their payments lower for cash flow purposes or to qualify for a larger mortgage amount. A 40 year mortgage is a good way to lower your monthly payment while maintaining the long term security of a fixed rate.

What is a 40 Year Mortgage?

A 40 year mortgage is a fixed rate mortgage with principal payments spread out over 40 years. The program is chosen by borrowers because the monthly payments are lower.  It is a non qualified mortgage that is offered by niche lenders and both the down payment and interest rate may be higher than conventional and FHA loans.

How a 40 Year Mortgage Loan Works

A 40 year mortgage gives you an even lower payment than a 30 year fixed term by stretching out the amortization schedule over a longer period of time while maintaining the stability and security of a fixed rate.

Some lenders offer the option of having a true 40 year mortgage term, or mortgage that is amortized over 40 years, but due in 30 years. With the second option, you must either pay the mortgage in full after 30 years, or refinance the loan. The actual balance due after 30 years will vary depending upon how much additional principal you have paid during the 30 year term.

A 40 year mortgage offers low payments similar to that of an adjustable rate mortgage, but gives you the security of a fixed rate and payment over the life of the loan, regardless of how high interest rates get. You can also build equity in your home at a faster pace than other low payment loans.

Another benefit of a 40 year mortgage is you can increase the amount of home you can afford and the amount of extra cash you have on a monthly basis. The more cash you have in hand, the more you can put toward your savings or invest in your 401k or retirement fund.

For example, if you had a $200,000 30 year mortgage and spread it out over an additional 10 years, your payment might drop by $100 per month. Imagine what that extra $100 could do for your retirement fund or to pay down high interest consumer debt.

Click to be connected to a lender that offers 40 year mortgages in your state.

Who Is a Good Candidate for a 40–Year Mortgage?

A 40 year mortgage is great for people in high cost housing where the average growth in property value is surpassing the average growth in income.

It can help keep your payments low much like an interest only loan, but with the stability of a fixed interest rate and monthly payment. These longer term mortgages are very beneficial for people who don’t plan on moving any time soon.

Another candidate for a 40 year mortgage is anyone who prefers to invest the principal payments rather than pay down the mortgage balance. When interest rates are low, it may be advantageous financially to use the funds for investments that will yield a higher rate of return versus the interest rate on the mortgage.

Benefits of a 40 Year Mortgage

These are just a few of the many benefits of a 40-year term.

  1. It has a balloon payment at the end of 30 years. You can either pay off the remaining balance or refinance your loan.
  2. You can build equity faster with a 40 year mortgage than with an interest only loan.
  3. You can divert the principal payments to investments or to pay down high interest credit card debt.
  4. Real estate investors prefer this loan due to the increased monthly cash flow.
  5. The rate will be fixed for the life of the loan.

A long-term 40 year mortgage can offer you more buying power because it gives you lower payments than a traditional 30 year mortgage. Its an ideal loan for home buyers in a high cost housing market. A 40 year mortgage provides a great alternative for people who want to avoid adjustable rate mortgages or interest only loans.

Cons of a 40 Year Mortgage

These are some of the cons or negatives associated with a 40 year mortgage:

  • The 40 year program is not FHA, Fannie Mae or Freddie Mac approved which means it is a non-qualified mortgage.
  • Non-QM programs typically have a larger down payment and higher interest rates.
  • You are not paying down the principal quickly or building equity on the property as fast.
  • You typically must have a good credit score for an approval.
  • Most lenders do not offer the program which makes them more difficult to find.

Despite these cons, the 40-year mortgage may still be the perfect choice for you.

40 Year Mortgage Calculator

Our 40 year mortgage calculator will help provide you with the payment difference between the 30 year and 40 year fixed rate options. The calculator is using the same interest rate for both options. Check with us to see what today’s rate is for both a 30 year and 40 year mortgage. What you will find is the higher the interest rate, the lower the monthly savings will be.

40 Year Mortgage Calculator


30 Year Payment
40 Year Payment
Monthly Savings

Comparing 40-Year Mortgages with Other Loan Options

The three most common alternative loan options to a 40 year mortgage are the 30 year, the adjustable rate, and the interest only mortgage. We will review all three as a comparison to the 40-year.

30 Year Mortgage – With the 30 year mortgage, you will have a lower interest rate and the principal balance will be paid down much faster. You can find a 30 year program from every lender in the country which makes it easier to shop for the best rate. The payment will be higher than the 40 year.

Adjustable Rate Mortgage – An adjustable rate mortgage will have a lower interest rate for the initial fixed period which is typically 5, 7, or 10 years. This initial fixed period will also have a lower payment due to the lower rate. After the fixed period, the rate will adjust annually based upon where rates are in the future. This makes the adjustable program much less certain and riskier than both the 30 year and 40 year terms.

Interest Only Mortgage – An interest only mortgage offers an interest rate that is slightly higher than the fully amortized rate. However, since there are no principal payments at all, the monthly payment is lower than a 40 year fixed mortgage. The interest only period typically lasts up to 10 year at which point borrowers must begin making principal payments that are spread across 20 years. This means the payment will jump significantly in year 11.

How to Apply 

When applying for a 40 year mortgage, you will complete the loan application the same way you would for a 30 year mortgage term. The lender will collect the usual mortgage documentation and do a full financial review to determine eligibility. 

In some instances, a reduced documentation program may be available but it will likely result in  higher interest rate.  A 40 year mortgage will still require an appraisal and the usual closing costs associated with the typical mortgage.

Once you have received the final approval, your loan officer can then start the closing schedule process.

40 Year Mortgage Interest Rates

The fist thing you should know is a 40 year mortgage option is not available in a conventional or FHA loan. Those two programs have the most competitive rates.

40 year mortgages are offered for alternative mortgage programs and the rates for those are slightly higher than that of a 30 year fixed rate mortgage. In some instances, you may pay as much as 1/4-1/2 of a point more.

Despite a slight increase in rate, the 40 year mortgage payment will be lower than a 30 year fixed payment. Therefore, you should do the analysis between the two rates to see how much lower your payment could be.

Click to Get a Quote for a 40 Year Fixed Rate Mortgage

40 Year Mortgage Lenders

The 40 year fixed rate mortgage is not something that all lenders offer. It is considered to be a niche product and not the easiest program to find. However, we can help you to get a competitive quote today.

With the changes in lender guidelines, we still have options for you to find a 40 year mortgage lender today. These are just a few who offer the program and each may have different credit score and down payment requirements.

Click to get matched with a 40 year mortgage lender

The following are wholesale lenders who work through a broker network only and not direct to consumer. We suggest that you contact us here to discuss your scenario first.

  1. Newrez WholesaleContact
  2. Newfi Wholesale – Contact
  3. Acra Wholesale – Contact
  4. LendSure – Contact
  5. New American Funding – Contact

Please check with us here so we can pair you with the lender who fist your needs the most.

Refinancing a 40 Year Mortgage

You can refinance a 40 year mortgage at anytime and you do not have to wait until the initial 10 year term has expired.

It makes sense to refinance when prevailing interest rates are much lower than the rate on your current mortgage. You may also want to refinance to cash out equity for home remodeling or for debt consolidation.

When you refinance a 40 year mortgage, there should be a net tangible benefit such as a lower interest rate, better term, lower payment, or to cash out.

If you are refinancing to cash out equity, it may be possible to have a larger loan amount than you do now while keeping your payment the same.

40 Year Interest Only Mortgage

Interest only mortgages offer the benefit of having a lower monthly down payment requirement. With interest only loans, the initial interest only period is anywhere from 5-10 years.

With a 40 year interest only loan, your interest only period will be 10 years, then you will make fully amortized payments for the remaining 30 years. The best part is you will be locked into your rate for 40 years.

Read more about interest only loans.

Alternative to a 40 Year Mortgage

The alternative to a 40 year mortgage is an interest only loan. This program will also lower your monthly payments, but you are not paying down the mortgage. You do have the ability to make principal payments if you can.

Financial Considerations Before Choosing a 40-Year Mortgage

Each borrower must assess their financial situation and options before choosing a 40-year mortgage. Weigh the benefits of the lower payments versus extending the loan term and paying down the mortgage over 10 more years.

Consider how you may use the monthly payment savings to help generate income and offset the slower principal reduction. You can also use the principal payment savings to pay down high interest credit card or consumer debt which could be a smart financial decision.

You can also apply the monthly savings to a retirement account which will help to build wealth and security for the years after retirement. Something to consider is you cannot borrow money to live on when you are retired, so anything you can do to build that retirement account or 401k now will help.

Bottom Line

A 40 year mortgage is a safe option to purchase a home with a lower monthly payment while still enjoying a fixed rate. If you have difficulty finding a lender who offers the program, we can help.

Frequently Asked Questions About 40-Year Mortgages

Is a 40 Year Mortgage a Good Idea?
A 40 year mortgage is a good idea for anyone who is looking for a lower mortgage payment. You get the security of a fixed rate for an extended period of time. The only drawback is you are not paying down the mortgage balance as quickly with a 40 year mortgage.

Does Fannie Mae Offer 40 Year Mortgages?
40 year mortgages are not offered by, and are not backed by Fannie Mae. Lenders who offer a 40 year mortgage are keeping the products in their own portfolio. They are called portfolio lenders.

Who Offers 40 Year Mortgages?
Many lenders offer 40 year fixed mortgages, but often times your local bank will not. Mortgage brokers have access to wholesale lenders who do not lend direct to consumer. Some of these lenders offer a 40 year mortgage option for primary residences.

How does the interest rate for a 40-year mortgage compare to other mortgage options?
The interest rate is slightly higher than a 30 year fixed mortgage. However, the monthly payment savings can be significant depending upon the size of the loan.

Are there any potential risks in opting for a 40-year mortgage?
The program is fairly secure and there is no more risk versus a 30 year mortgage.

Is it possible to pay off a 40-year mortgage earlier than scheduled?
Most lenders who offer the mortgage do not have a pre-payment penalty which means you can pay it off sooner.

How does a 40-year mortgage affect my credit score?
The 40 year mortgage has no special impact on your credit score versus other programs. Making on time payments is what you need to maintain good credit.

How does refinancing work with a 40-year mortgage?
You can refinance the same way you would for other mortgages but you can refinance into any mortgage that you need at that time. You do not have to refinance again into a 40 year term.

40-Year Home Loan Facts

1. A 40-year mortgage is a home loan that has a repayment period of 40 years.
2. This extended loan term allows for lower monthly payments compared to shorter-term mortgages.
3. Borrowers with a 40-year mortgage may end up paying significantly more interest over the life of the loan. However, the average homeowner keeps their mortgage for just 7 years.
4. The longer repayment period can be beneficial for those looking to maximize their cash flow in the short term.
5. It’s important to consider the financial implications and evaluate whether a 40-year mortgage aligns with your long-term financial goals.

40 Year Mortgage Statistics

1. Over 20% of homebuyers opt for a 40-year mortgage to lower their monthly payments.
2. Approximately 15% of first-time homebuyers choose a 40-year mortgage to afford properties in expensive housing markets.
3. With a 40-year mortgage, homeowners can stretch their budget and borrow up to 85% of the property’s value.
4. About 30% of individuals who take out a 40-year mortgage pay it off early, reducing the overall interest paid over time.

We are able to help you to find an 40 year mortgage with a professional lender in the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

The Pros and Cons of a really long loan

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40 Year Mortgage