What is a 40-year mortgage and is it beneficial?
By mortgage writer: Dave Leonhart

Since the 40-year mortgage is adding more years to the loan it will have a lower payment than a standard 30-year fixed rate. Thus, you will build equity slower since it takes a longer time to payoff the loan, and you will also pay more total interest over the life of the loan.

They have been around for awhile now, but many lenders do not offer a 40 year mortgage, so if you're looking for one, you might want to consider using this link to our www.ratesiq.com lender search database to see if any lender is offering one.

Their recent popularity has been due to rapidly rising housing prices since it will allow you to purchase a slightly higher priced home, but don't count on it being too much more. On average, you might be able to purchase a home with a $20,000 higher price tag, compared to a typical 30-year loan.

But don't forget, you also pay considerably more in interest over the life of the loan compared to a 30-year mortgage. Those extra 10-years can amount to a lot of extra interest. See our mortgage payment calculator at compare three loans to see how much more interest you'll pay.

If you're considering getting one, you can compare lenders rates in your area to see if there might be another loan option than has a lower payment, and where you'll pay less interest. Click on the compare loan feature. http://www.loan-savings.com/search_results.php?id=6

Normally, we do not recommend the use of a 40-year mortgage to purchase a larger or more expensive home. Usually, it is best to determine what you can comfortably afford and then structure a mortgage that is best or you, given your overall situation.

However, if you are the savvy type, you could get a 40-year mortgage and invest the difference and hopefully obtain a greater return than you would be paying in additional interest. Or, as another example, if you were confident that house prices would rise, and you didn't expect to own the home for too long, a 40-year loan could help you leverage into a larger home.

But let me end by saying, we do not recommend strategies that require the appreciation of real estate in order to succeed, particularly over the short term (one to five years). Although we have been experiencing good appreciation in the US recently, it is not guaranteed to continue forever.