What Can a 40–Year Mortgage Do For You?

A 40–year mortgage can offer you more buying power because it gives you lower payments than a traditional 30–year mortgage. It's an ideal loan for home buyers in a high–cost housing market. A 40–year mortgage provides a great alternative for people who want to avoid adjustable–rate mortgages or interest–only loans.

How Our 40–Year Mortgage Loan Works

A 40–year mortgage gives you an even lower payment than a 30–year fixed term by stretching out the amortization schedule over a longer period of time. With the 40–year mortgage, your mortgage term is actually only 30 years, but the loan is amortized over 40 years. This means that after 30 years, you must either pay, in full, the remaining balance on the loan or refinance the loan. The actual balance due after 30 years will vary depending upon how much additional principal you have paid during the 30–year term.

A 40–year mortgage offers low payments similar to that of an adjustable–rate mortgage, but gives you the security of a fixed rate and payment over the life of the loan, regardless of how high interest rates get. You can also build equity in your home at a faster pace than other low payment loans.

You can also increase the amount of home you can afford and the amount of extra cash you have on a monthly basis. The more cash you have in hand, the more you can put toward your savings or invest in your 401k or retirement fund. For example, if you had a $200,000 30–year mortgage and spread it out over an additional 10 years, your payment might drop by $100 per month. Imagine what that extra $100 could do for your retirement fund!

Who Is a Good Candidate for a 40–Year Mortgage?

A 40–year mortgage is great for people in high–cost housing markets such as the Northeast or on the West Coast, where the average growth in property value is surpassing the average growth in income. It can help keep your payments low much like an interest–only loan, but with the stability of a fixed interest rate and monthly payment. These longer term mortgages are very beneficial for people who don't plan on moving any time soon.

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