All About The 40 Year Mortgage Loan: Pros and Cons

All About The 40 Year Mortgage Loan: Pros and Cons

Similar to the traditional 30 year mortgage, with an amortization term 10 years longer, the 40 year loan could help a borrower achieve greater purchasing power in getting into a home they could not otherwise afford by reducing their monthly payment and stretching it out over a longer time horizon. The 40 year mortgage has been around for several decades and goes in and out of popularity based on current interest rates and housing prices. The 40 year loan term has been most prevalent in those areas where housing costs have exceeded a region’s growth rate of income. However before proceeding with a 40 year loan, a borrower should carefully weigh all the options and consider exactly what they hope to gain from the 40 year versus other types of loans available. The following are some pros and cons to think over before making the move into a 40 year mortgage:

  • The loan appeals to first time buyers who hope to buy more home. The lower payment makes handling their first mortgage far more manageable. It also means extra disposable monthly cash on hand which many new home buyers frequently discover they’ll need.
  • It may be a safer, less volatile alternative to an adjustable rate mortgage, the 40 year mortgage offers a fixed rate for a longer period of time. However some of the 40 year loan products are actually balloons, or 40 due in 30 year loans, which are amortized over 40 years but due and payable in 30 years.

Today’s 40 Year Fixed Rate Mortgage Quotes

  • Could be a good option at times when a higher interest rate climate exists as a 40 year loan may offer a lower payment alternative to other shorter term mortgages. As most consumers tend to maintain a mortgage for an average period of only 5-7 years before selling the home or refinancing, this initial payment relief can be welcome. Hopefully the 40 year term borrower can refinance into more attractive financing options in the future as their income grows.Continue reading