While many Americans finance their homes with 15-, 20- or 30-year mortgage loans, some lenders offer a 40-year mortgage option to those who are unable to secure a qualified mortgage but still hope to purchase a home.1
This lengthy mortgage term might have remained on the fringe of home lending if not for a recent announcement from the Federal Housing Administration (FHA) that authorized a 480-month (40-year) loan mortgage modification program for the first time. The rule went into effect in May 2023.1
With rising interest rates, climbing mortgage payments and high home prices overall,2 the 40-year mortgage has become a trending topic. Here's what you should consider before taking out a 40-year mortgage.
The Basics of A 40-year Mortgage
The FHA-authorized 40-year loan modification is available for those who are in default on home payments. The new mortgage terms are designed to reduce monthly payments so you can continue paying for your home versus going into foreclosure.1
Forty-year mortgages are rarely offered for new home purchases because of the risk to the lender and borrower. They're not considered qualified mortgages by the Consumer Financial Protection Bureau, as qualified mortgages must contain less risky features so borrowers can afford to pay back the loan.3
Terms longer than 30 years fall outside the qualified category because of their longer payment periods. Having a 40-year mortgage means you'll pay much more for your home than you would with a 30-year or shorter mortgage because you're paying interest for 10 or more additional years.
There's also the mental factor. Most of us can envision our future after paying off a mortgage—if we buy a home at age 30 with a 30-year mortgage, our home will be paid off a few years before retirement. A 40-year mortgage puts the same 30-year-old at 70 years of age when they finally pay off their home. And because they've paid more than their counterparts who had shorter-term loans, there's less money over the years for investments, retirement savings and other important financial goals.
Still, these longer mortgages could be the right choice for some current and future homeowners. Forty-year mortgages can help homeowners facing financial difficulties stay in their homes, help others purchase new homes and allow homeowners to save money through lower monthly payments if they don't plan to stay in their homes for long.
How to Calculate a 40-year Mortgage
A mortgage calculator can help you estimate your monthly payments and the total cost of your home over 40 years. You can then compare it to estimated monthly payments with a 30-year mortgage or shorter, and the full cost when paying for the home for fewer years.
You might be surprised to discover you save just a few hundred dollars—or less—each month with a 40-year mortgage, while paying hundreds of thousands more over the long term.
This chart provides an example:
| Term |
Loan amount |
Interest rate |
Monthly payment |
Total paid during the life of the loan |
| 30-year mortgage |
$320,000 |
6.7% |
$2,348.22 |
$845,360.23 |
| 40-year mortgage |
$320,000 |
6.7% |
$2,234.71 |
$992,211.15 |
In this scenario, you only lower your monthly payment by $113.51, but you've paid $146,850.92 more for the same home by extending your term.
Advantages of A 40-year Mortgage
There are some reasons to consider a 40-year mortgage. Here's what to think about:
A 40-year-mortgage could keep you in your home
For those who take advantage of the FHA-authorized 40-year loan modification while in default, the new mortgage terms can help reduce your monthly payments so you can continue paying for your home versus going into foreclosure.1
A 40-year mortgage can help you qualify to buy a home
When the FHA plan was announced, many believed the federal government had authorized 40-year mortgages for new homes as well. This did not happen, although the announcement made more people aware of the existence of 40-year mortgages for new homes. With higher interest rates and a scarcity of listings (depending on where you live), the rise in 40-year mortgage options could be considered a response to less-than-favorable economic conditions.
For that reason, a 40-year mortgage could be a tool to help some potential homeowners get into the market when they couldn't before because they can afford the lower monthly payments a 40-year mortgage offers.
A 40-year mortgage can help you save money if you plan to move soon
A 40-year mortgage could be a budget-friendly option if you want the advantages of homeownership but don't plan to stay in the home for long. People in the military, the medical sector and other careers that have frequent relocations, for example, could benefit from lower monthly payments if they know they'll be selling their home in three to five years and can gain a profit from the sale.
You can refinance
When interest rates drop, you can refinance into a conventional mortgage while you already live in your dream home. You can also consider refinancing into a 30-year or shorter-term loan when your financial situation and credit improve.
Disadvantages of A 40-year Mortgage
Before you jump in, think about the following factors:
You'll pay more over the life of the loan
The chart above gives you an idea of how much more you'll pay if you keep your mortgage for 40 years. Even if you refinance before that, the longer you hold on to a 40-year mortgage, the more you'll pay in interest than you would with a shorter-term loan.
You could have less equity in the long run
Because your monthly payments are lower, you might not build as much equity with a 40-year mortgage as you would with a 30-year or shorter-term mortgage. This could create an issue if you want to sell your home but don't earn enough money from the sale to put toward a new home payment.
If you want to take out a home equity loan or do a cash-out refinance to get money to pay off debt or make a large purchase, you'll also have less money to access compared to those with shorter-term loans.
How to decide on A 40-year Mortgage
With the recent federal approval of a 40-year loan modification and lenders offering more 40-year options for new purchases, more homeowners and potential homebuyers might be considering a 40-year mortgage as an option to purchase or stay in their home.
For most new buyers, however, lenders recommend sticking to a 30-year mortgage loan or shorter, as it's a more affordable and sustainable option over time.4 But if you want to move forward with a 40-year mortgage, do so with the understanding of the true cost of the loan and whether a 40-year mortgage can help you achieve your financial goals.
Shannon Shelton Miller is a writer living in the Midwest who enjoys finding stories at the intersections of health, beauty, sports, business, history and culture. A writer and journalist for more than 25 years, her work has appeared in numerous national websites and publications.
READ MORE: What Should I Know Before I Take Out My First Mortgage?
Sources/references
1. Increased Forty-Year Term for Loan Modifications. Federal Register. March 8, 2023.
2. Bahney, A. Mortgage rates jump to 6.81%, their highest level this year. CNN. July 6, 2023.
3. What is a Qualified Mortgage? Consumer Financial Protection Bureau. June 10, 2022.
4. Stauffer, J. What is a 40-year loan and how does it work? CNBC. June 11, 2023.