Is a 40-Year Mortgage Right for You?

When you get a new loan to refinance a mortgage, that is, when you refinance your existing first mortgage, you may be offered the opportunity to refinance to a 40-year loan rather than the more traditional 10-year, 15-year, 20-year, 25-year or the old standby, the 30-year mortgage. The 40-year mortgage is becoming increasingly popular and may soon replace the 30-year mortgage as the standard mortgage in the United States.

Why a 40-year loan? There are several reasons. Because principal and interest payments are stretched out over 40 years rather than, say, 30 years, the monthly mortgage payments are less. Because of this, many people who cannot quite qualify for a 30-year mortgage, may easily qualify for a 40-year mortgage.

In addition to that, many people who do qualify for a 30-year mortgage find that they can purchase a larger, often more expensive, home if they switch to a 40-year mortgage.

If you are in the process of taking out a new loan to refinance a mortgage – in other words, if you are refinancing your first mortgage – you will find that replacing your existing 30-year (or less) mortgage with a new 40-year mortgage will save you money each month. Note: How much you save will depend upon the size of your loan and the length of your previous loan.

The negatives regarding a 40-year loan include the fact that it will be forty years before you own your home free and clear. For some people this is a major consideration; for others it is irrelevant.

The other negative is that during the extra ten years of the loan you will be paying tens of thousands of extra dollars in interest. Again, for some people this is a major stumbling block, and others are unconcerned.

Whatever your current opinion on the 40-year mortgage loan, it is probably in your nest interest to check it out and learn all you can about it, especially if you are in the midst of refinancing your current mortgage, or are considering it.