Best 40 Year Mortgage

Ok, I have something to say about 40 year mortgages.  There is so much bad press about a 40 year mortgage and 40 year mortgage rates being high.  They tell us that very little of our monthly premium is paying down the principle and so much is paying for interest for a very long time.  Some conventional lender is touting his wares by trying to convince us that 30 year mortgage rates help you pay down your balance so much more quickly.  Well, I’ve got news for you Mr. Banker.  At the moment I can’t qualify for one of your “more appealing home mortgage loans” and I would much rather pay a few dollars every month for ten of those 40 years on a home of my own than to pay a landlord $1000 a month for something I will never own.  Furthermore, I will never have a prayer of owning ANYTHING if I keep paying the mortgage for someone else.  A 40 year mortgage gives ME the opportunity to own MY own home NOW even if I don’t make enough money to qualify for a loan at 30 year mortgage rates.

Take a look at these figures and see if you don’t think a 40 year mortgage is a good thing.  I’m going to go conservative and say a house sells for $100,000.  Let’s say you can put 10% down and current mortgage rates are 6.5 %.  If you run the figures at these conventional 30 year mortgage rates you come up with mortgage monthly payments of $710.  Remember, you don’t qualify for 30 year mortgage rates.  This is hypothetically what your landlord is paying.  So you are giving him a monthly profit of $290.  This is money YOU could be putting in YOUR pocket.  Now let’s look at the loan you are able to qualify for offered by 40 year mortgage lenders.  Taking the same figures and adjusting them accordingly for 40 year mortgage rates.  We are talking about the same $100,000 home but you can realistically only put down $5,000.  (Usually you need at least 10 or 20 percent but I am assuming you can’t come up with that amount.)  Remember the interest rates are higher on a 40 year mortgage so we will go with 7%.  Now if you run the 40 year mortgage calculator you would be paying $690 a month.  That means that you will realize a difference of $310 per month below what you are paying your landlord.

Think about it!  You can own your own home and pay the electric and maybe the other utilities as well with what you are now paying your landlord to rent his home.  This is all possible because of an entity called a 40 year mortgage.  I don’t know about you, but I would rather pay a higher interest rate and a few dollars a month on the principle of my own home than to pay a thousand dollars a month to rent a home that will never be mine.  I guess Mr. Banker took his bonus we paid him with our tax dollars to figure out a way to keep the rest of us down.  I think I’ll stick with my 40 year mortgage, thank you very much.  (And btw, in a few years when I have been able to save some money I will refinance at 30 year mortgage rates.  Let’s see who’s laughing now, Mr. Banker.  I’ll be laughing all the way to the bank.  I can assure you it WON’T be yours!)

With the recent problems in the housing market, due to an increasingly ailing economy, many homeowners are struggling to afford their mortgage payments. This has prompted some homeowners to consider a 40 year mortgage. A normal mortgage amortization period would be anywhere from 15 to 30 years. With a 40 year mortgage however, the homeowner usually opts to extend their current fixed-rate mortgage to 40 years, in order to lower the monthly cost of their mortgage payment. Many home buyers also choose to start their mortgage at a 40 year amortization rate so that they can afford the house that they want to buy. If you are considering a 40 year mortgage for your current or potential property, then it would be wise to learn as much as you can about 40 year mortgages before you make such a crucial financial decision.


The proponents of 40 year mortgages would point out the obvious advantage of opting for a 40 year mortgage on your property, and that is the fact that you will have lower monthly mortgage payments. If you are having trouble figuring out exactly how much you stand to save by extending your mortgage period to 40 years, then you can use a tool known as the 40 year mortgage calculator. This tool will allow you to calculate the difference that a 40 year mortgage would make for you, so that you can gage the advantages of such a decision. Sometimes choosing a 40 year mortgage can allow you to buy a house that you could not afford with a shorter mortgage period.


The downside however is that a 40 year mortgage carries higher interest rates than other shorter amortization periods. In fact the interest rate can be as high as .400 percentage points higher than a 30 year mortgage on the same loan amount! These interest rates can add up to a very hefty sum over the years, and you could end up paying more in interest than the value of the mortgage loan itself! So the difference between the interest rates of a 30 and 40 year mortgage can be quite staggering depending on the conditions of the loan. You will also have to deal with the fact that the equity on your home will build at a snail’s pace in comparison to the equity of a home with a 30 year mortgage. There are several alternatives that would allow you to speed up the equity building process, but they also have their downfalls as well.

Overall, it comes down to whether or not you would like to save money in the long term, or in the short term. If you would like to move into a house that you simply cannot afford at the moment with a 30 year mortgage, then by all means opt for the 40 year mortgage. However, if you are thinking about what will happen in twenty years as a result of the 40 year mortgage, then it may be wise to think long and hard about the elevated interest rates and the slow equity build up. Ultimately the decision will depend upon your discernment as a home buyer/owner , and your ability to be responsible financially. Hopefully this information has helped someone gage the pros and cons of a 40 year mortgage, so that they can make a well thought out decision that will affect their future positively.

Everyone dreams of owning a house and people who cannot afford to buy a house on their own opt for housing loans by borrowing money at a given rate of interest. There are many lenders out there offering various schemes for repayment of these loans. Some of these schemes are meant for short term repayment while some are for longer term.

Conventionally, 15 and 30 year mortgage schemes are preferred by most of the buyers.  If you are looking for longer term repayment plans, then you can opt for a 40 year mortgage or a 50 year mortgage scheme.  As a matter of fact, the 40 year mortgage is becoming increasingly popular.  Nevertheless, there are some disadvantages to it as we will discuss below.

To begin with, a 40 year mortgage spreads through a span of 40 years for repaying the loan.  That can be too long for some people.  Of course, if you have enough income to repay the loan within a shorter period, you can free yourself from the debt much sooner.  In that case, 40 year mortgage schemes are not be suitable for you.

If you are considering a long term mortgage, you should keep in mind that your interest rate will be quite higher than that of a short term mortgage.  It is obvious that people who are capable of repaying the loan amount within a shorter period should not apply for a 40 year mortgage, since the interest rates will make it more expensive. In essence, you are getting lower monthly payments, since they are spread out throughout more years, but you have to pay higher interest rates in return.

You will hear people claiming that a 40 year mortgage offers tax benefits for a longer span, and it’s true that they do.  However, once again those tax benefits would not be enough to make up for the higher interest rates.  Think about it, the repayment of a housing loan that is borrowed under 40 year mortgage in the year 2010 will be coming to an end in the year 2050. Waiting for a period of forty years to actually fully own your house and be debt free is too long. Then again, if you want to keep a healthy credit history, such a mortgage can be the best option for you.

Depending on the income and loan repayment capacity of an individual, an appropriate scheme must be chosen.  For instance, people with tight budgets SHOULD opt for a 40 year mortgage while people who can keep up with the higher monthly payments of a 15 or 30 year mortgage should apply for those.

Of course, there are almost no rules when it comes to mortgage shopping. The one and only golden rule that I can give you, is to do your research. I have seen 40 year mortgages being offered that had lower interest rates than 30 year mortgages. Keep your eyes and ears open for some of those great deals that come up every once in a while!