Getting a Forty Year Mortgage

Don’t be shocked about hearing some lenders will stretch out your mortgage payments over 40 years. It’s been going on for years. A 40 year mortgage is nothing new. However, like the old Clint Eastwood western, let’s explore the good, the bad and the ugly.

Here is a graph about the relationship between mortgage rates and short term interest rates:

Possible Higher Rates

As in life there are risks in most everything. In this type mortgage you, the borrower, need to have a quick epiphany on why a lender would extend your financing for 40 years. You also need to keep in mind that mortgage lenders are in the business of not only making loans but making money. They’re not going to give you a 40 year mortgage unless it’s beneficial to them in terms of a higher interest rate and more costly fees.

The lovely frosting on the that 40 year cake will be lower monthly payments. But at the same time you swipe your finger over that vanilla frosting you may notice the small print indicates you will be paying not only a higher interest rate, but a few more loan points and even a few more bucks down, as well. Hey, you don’t get nothing for nothing. Consider this. Perhaps you couldn’t qualify at the 15 or 30 year mortgage term, but if extending out to a 40 year mortgage moves you in that home you have picked out and assuaged your frustration and pain, that’s a good thing.

Of course, doing all this 40 year mortgage extension stuff it will take a lot longer to build up any equity in your home because in the principal and interest picture, a lot less will be applied to the principal and more to the interest part of the loan. 40 year loans pretty much work okay for first-time home buyers on a tight budget and with that thought in mind might choose to eschew the bad parts of the loan and only look at the good parts.

Those lenders who wish to extend a loan over 40 years will draw a crowd and be attractive to younger borrowers and first-timers, not the older folks. Seniors still making payments when they hit age 70 or 80 might find it a stretch to meet obligations on social security, pension or any other retirement pay. Another option besides a 40 Year Mortgage is if you are over 60 years old, and need some extra money you can apply and get a lifetime mortgage.