Key takeaways

  • Compared to a 30-year mortgage, 40-year mortgages come with a lower monthly payment, which make them a helpful option for homebuyers who'd otherwise not be able to afford a home.
  • These mortgages come in three main types: a fixed-rate mortgage, an adjustable-rate mortgage and an interest-only option where you only pay interest for the first 10 years of the mortgage.
  • You'll pay significantly more in total interest with a 40-year mortgage, and it will take you longer to build equity.

When comparing mortgage rates, the two most common loan terms are 15 years and 30 years. While 30-year mortgage payments are lower than 15-year ones, with interest rates climbing quickly, those longer-term payments are becoming more unaffordable.

There is a way to stretch that payoff window even further: a 40-year mortgage. This extended mortgage comes with lower monthly payments, but the additional decade means you’ll pay a significant amount more in interest over the life of the loan.

What is a 40-year mortgage?

A 40-year mortgage allows you to repay your loan over 40 years instead of the more common 30 years or 15 years. This extended term often comes with a lower monthly payment but at the cost of a higher interest rate and more paid toward interest over the loan term.

While not as widely available, a 40-year mortgage loan might be a solution for borrowers having trouble affording their monthly payments with a shorter term.

High home prices and interest rates equate to a high monthly payment — making it difficult for many would-be homebuyers to afford. In this tough market, the more-affordable 40-year mortgage can be an attractive alternative to the traditional 30-year mortgage.

How do 40-year mortgages work?

Forty-year mortgages, like other home loan offerings, come in a variety of options that can impact your payment. You can get one with a fixed interest rate, for example, or one with a rate that changes over time. Here are some options:

  • Fixed-rate mortgage Just like with a 15- or 30-year fixed-rate mortgage, your monthly mortgage payment stays the same throughout the 40-year life of the loan, thanks to a fixed interest rate that doesn’t adjust or change.
  • Adjustable-rate mortgage (ARM) With a 40-year ARM, your interest rate can fluctuate throughout the life of the loan. For example, with a 5/1 ARM, you might start off paying 6 percent for the first five years. Then, every year after, your rate adjusts in line with the market. These adjustments might come with maximum rate increases — 5 percent over the life of the loan, say — which can dramatically change how much you pay. Couple that with a longer loan term, and you raise your risk of more rate hikes.
  • Interest-only loan Outside of a modification, some lenders might allow you to take out a 40-year mortgage that requires only interest payments during the first 10 years. Afterward, the loan effectively becomes a 30-year fixed-rate mortgage. The benefit is even smaller monthly payments upfront — but the trade-off is risky, because you build no home equity within the first decade (unless your home rises in value). What’s more, you run the risk of default by not chipping off any of the loan principal for the first 10 years, and the risk of needing to pay a higher interest rate after 10 years. “I do believe [this] will become more popular as it will offer a lower monthly payment for homeowners,” says Shmuel Shayowitz, president and chief lending officer of mortgage banker Approved Funding, based in New Jersey.

Where to find 40-year mortgages

It’s possible to get a 40-year mortgage loan, but it might not be easy to find, because many mortgage lenders don’t offer it in their suite of loan programs. The Consumer Financial Protection Bureau (CFPB) classifies mortgages with terms longer than 30 years as “unqualified,” so most established banks and lenders don’t offer them. A “qualified” mortgage is one that meets certain standards set to ensure consumers can reasonably afford the loan.

Some smaller banks, credit unions and non-traditional lending institutions might offer a 40-year mortgage. Carrington Mortgage, for instance, is a larger, niche lender that offers a 40-year option. Just make sure to compare offers with more than one lender, and be cautious if you get an offer with a rate that’s considerably higher than what’s out there on the market. Ask your lender about the down payment requirements and any fees, including origination fees and prepayment penalties.

If you’re currently a borrower with a Fannie Mae- or Freddie Mac-backed loan, you might be eligible for the Flex Modification program, which extends your mortgage term to 40 years. In some cases, you might qualify for a lower interest rate, too. In addition, certain FHA loan borrowers have access to a similar 40-year option.

Both of these 40-year programs are loan modifications, which means you’re changing the terms of your loan to make the payments more affordable. They stemmed from the need for relief during the pandemic.

30-year mortgage vs. 40-year mortgage

Here’s how the math breaks down between a 30-year and 40-year mortgage. This example doesn’t factor other costs you’ll need to pay as a homeowner, such as homeowners insurance and property taxes — it only reflects paying the principal and interest:

Pros and cons of 40-year mortgages

Pros of 40-year mortgages

  • Low monthly mortgage payment: If your budget is tight, every little bit counts. For example, on a $400,000 loan at 7.85 percent, a 40-year mortgage would come with a $157 reduction in your monthly payment.
  • Short-term savings: If your 40-year mortgage comes with a 10-year interest-only period, you can free up money otherwise spent on your mortgage. You could use the money you save to bolster your savings, pay for education or make other investments. Just keep in mind that interest-only payments mean none of the payments are going toward building equity.

Cons of 40-year mortgages

  • Expensive over the long-term: ​​Compared to 30 years, the extra interest over 40 years adds up. At that point in your life, imagine how much more you could have done financially — to prepare for retirement, for example.
  • Higher interest rates: While the chart above uses a 7.85 percent interest rate on both a 30-year and a 40-year mortgage, the reality is that a mortgage lender will likely charge you a higher interest rate for a longer term (unless you’re eligible for a modification for relief).
  • Large payment swings: If you have interest-only payments for the first 10 years, you’ll see a significant jump in monthly payments once you hit year 11. Alternatively, if you have a 40-year ARM, your interest rate will adjust with the market, which can lead to significant fluctuations in your payment.
  • Not widely available: With 30-year mortgages, you’ll have a wide variety of options to compare. There are fewer choices when shopping for a 40-year mortgage, so you’ll have less of a chance of finding a great deal.

40-year mortgage rates

The interest rates on 40-year mortgages will likely be higher than 30-year mortgages. While the rate you might qualify for will vary depending on a number of factors, you’ll most likely pay more for the privilege of having more time to pay it back — just as you pay a higher interest rate on a 30-year mortgage than on a 15-year mortgage. The adage “time is money” also applies when you borrow cash.

40-year mortgage FAQ

  • If the lender you’re working with offers it, you might be able to refinance your current mortgage into a 40-year mortgage. While that move will lead to lower monthly payments now, you’ll be delaying the ability to pay off the mortgage for four decades. Plus, you’ll need to be able to pay closing costs, which can run you thousands of dollars.
  • Unless you need a 40-year modification due to hardship, this option might be a good idea only in a few very specific situations.

    “Investors who are looking for cheap monthly payments to increase cash flow [can benefit from] the 40-year mortgage program,” says Joshua Massieh, CEO of mortgage broker Pacwest Funding in San Diego. “Savvy investors will end up cash flowing more per month and end up refinancing or selling the property within the first 10 years of ownership.”

    Some borrowers with temporarily reduced income might also benefit from a 40-year mortgage with 10 years of interest-only payments. This includes medical residents, surgical fellows, tech employees waiting for stock options to vest or those waiting to access a trust fund or legal settlement.

    Regardless of your situation, however, you’ll need to be aware of the risks and make sure you can handle the increased payments after 10 years.

    Additionally, be extremely wary of 40-year ARMs. A low rate today might be tempting, but if it increases in five years, you could find yourself in a tough position. For most borrowers, a 40-year mortgage winds up costing too much in the long run to justify any (perceived) savings along the way.
  • If you’re seeking lower monthly payments, you have options:
    • A 30-year fixed-rate mortgage might come with a slightly higher monthly payment, but you’ll save significantly more over the life of the loan.
    • A shorter-term ARM could offer smaller loan rates at the beginning of your term, and as you save more and improve your credit, you can refinance into a more predictable fixed-rate mortgage before your ARM resets.
    • A conventional loan paired with down payment assistance means you’ll need to borrow less, lowering your monthly payment overall.
    • Paying mortgage points upfront reduces your interest rate, which trims your monthly payment moving forward. You’ll need to have the cash to pay for this at closing, however.

    Overall, 40-year mortgages can be more risky and more expensive than their more common counterparts, so carefully weigh the pros and cons as you compare options when buying a house.