The 40 year mortgage is back! But this 40-year mortgage isn’t a standard mortgage, where each month your pay down your interest and principal. Rather, the loan is interest-only for the first 10 years — you’re only paying for the interest on the loan. You can pay more to pay down the principal with no penalty, but you don’t have to.
After the 10 years are up, the loan effectively becomes a standard 30-year fixed rate loan, where each payment goes toward both your interest and reducing your loan principal. After 40 years, you’ve paid off your loan completely! Note that loans with interest only periods may have a higher interest rate, more points, or more fees than fully amortizing loans.
What are the advantages of a 40 year mortgage?
- Monthly mortgage payments are very low during the interest-only period
- Your interest rate is fixed for the life of the loan
- Gives you 40 years to pay off your loan
What are the disadvantages of a 40 year mortgage?
- Interest rates may be higher than with a conventional, fixed-rate loan
- You pay more in interest over the life of the loan, compared to shorter-term loans like the 30 year fixed or 15 year fixed
- Takes longer to build equity, since all your early payments go to interest
- Monthly mortgage payments will rise once the interest-only period ends
- May be harder to refinance unless your property appreciates during the loan period
How does a 40 year mortgage compare to a 30 year mortgage?
- A 30 year fixed-rate mortgage lets your pay less interest over the life of the loan compared to a 40 year mortgage. Interest rates are usually lower and you can start building equity immediately. Monthly mortgage payments are likely to be higher, however. Learn more about the 30 year fixed
- A 40 year fixed-rate mortgage has lower monthly payments during the first, interest-only period, allowing you afford more house for a given payment. The lower monthly payments also mean more cash for you to spend or invest on a monthly basis. However, you pay more in interest over the life of the loan and do not begin build equity until the interest-only period expires, or you decide to end it.
What would be my monthly payment on a 40 year mortgage?
You can calculate your 40 year mortgage payment schedule using our interest only mortgage calculator. Note that 40 year mortgage rates depend on your credit, income, and other factors. Contact us to figure out what your 40 year mortgage payment is likely to be.
What other mortgage options do I have?
- Want a lower interest rate, or to build equity faster? Consider a 30 year mortgage.
- Looking for easier loan terms? Consider an FHA loan, which also permits low down payments and more flexible credit qualifications.
- Likely to move in less than 5 to 10 years? Consider an adjustable rate mortgage.
Why trust Newfi Lending with your 40 year mortgage?
Newfi is a direct lender, not a broker, so we can make lending decisions fast and at low interest rates. We’ve earned a five-star customer satisfaction rating from LendingTree for our low rates, fast processing, and excellent customer service. Give us a call at (888) 316-3934 and see just how friendly we are!
How can I get more information?
Talk to us at Newfi Lending. We’ll get you a personalized 40 year mortgage rate and review other mortgage options tailored to your situation. Note that all loans are subject to credit qualifications.