40 year mortgage
Issues about 40 year mortgages
Looking for a 40 year mortgage?
Forty year mortgages can a solution for people looking to buy their own home. It can help some people who would not otherwise be able to afford a home.
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Free information about taking out a forty year mortgage
Why would some people want to take out a 40 year mortgage? Often the reason people do it is because by choosing the right 40 year mortgage the monthly repayments could be lower than they would be on a shorter period mortgage.
Better home?
It may mean that people would be able to buy a better house than they could with a 25 or 30 year mortgage. For other people lower monthly payments with a 40 year mortgage might be the difference between renting or being able to afford a place of their own.
Lower monthly payments?
Each monthly repayment will be a mix of interest and capital. In theory, a 40 year mortgage would have smaller monthly repayments than a 25 or 30 year mortgage because with a 40 year mortgage the capital will be repaid over a longer period.
However, this only applies if the interest rate is the same for the different length loans. If a lender thinks that a 40 year mortgage is riskier than a 25 year mortgage they would charge a higher interest rate. If there is a higher interest rate for the longer term mortgage it is possible that you could be paying more interest every month on your 40 year mortgage than you would with a 25 year mortgage. This may even be more than you save on capital repayments so you would need to check out the various scenarios.
Interest only mortgage v 40 year mortgage?
Interest only loans are available in some countries. These will have no element of capital repayment so you would only pay interest every month. The lender will normally be looking for some evidence of your ability to repay the loan at the end of the term. The term could be tailored to suit your needs.
40 Year Mortgage v Typical Working Life
If you take out a 40 year mortgage don’t forget about your ability to make payments over the full term of the mortgage. Forty years is about the same as the average working life so it is potentially a very long term commitment. If you take out a mortgage when you are aged 25 then you will probably still expect to be working forty tears later when you are 65. Taking out a mortgage when you are 40 years old means that the final payment on the mortgage would happen when you are 80 years old. Do you seriously expect to be working at this age? If not, you will need to make sure you save sufficient money during your working life. You will either have to continue to make payments after you retire or you will have taken steps to settle the mortgage earlier.See more articles about 40 year mortgages
The information on this website is for general interest only and is not specific to any single country. Take professional advice before you sign anything or make a financial commitment. Refer to our legal page for further details. Rules vary between countries but you could be at risk of losing your home if you do not keep up with your repayments.