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In the last few years, the 40-year mortgage has been increasing in popularity for home buyers in high-cost housing markets as an alternative to adjustable-rate mortgages. Although Quicken Loans doesn’t offer a 40-year mortage currently, we do have options to keep your payment low. Call us at (800) 654-0068 to find out how to qualify for your absolute lowest mortgage payment.

How a 40-Year Mortgage Loan Works

A 40-year mortgage gives a 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.

Similar to an interest-only loan or an ARM, a 40-year mortgage potentially increases 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 popular 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.

These longer term mortgages are most beneficial for people who don’t plan on moving any time soon, but since the average American moves every seven years, in most cases, an interest-only actually makes more financial sense. You’ll most likely get a better rate and terms with an interest-only and save money in the long run.

The bottom line is that 40-year mortgage loans aren’t the best choice for most homeowners. Call (800) 654-0068 to talk to a Quicken Loans home loan expert today for determining which home financing option is best for you. Is an interest-only better than a 40-year home loan for you? Talk to a Quicken Loans Mortgage Expert today to help you decide at (800) 654-0068.

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