What are the downsides of a 40 year home loan?

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I currently have a 30 year loan, but can’t really afford much beyond the mortgage. I’m sure there’s plenty to consider, but I’m not sure what those things are.

  1. Reply
    EAA Duro
    February 22, 2011 at 6:15 pm

    Interest, interest, interest, paid to the financial institution that receives the interest you pay for an eternity.
    Closing costs on the refinance may be an issue also. Wow I just started seeing them offered also and can’t believe it. Pretty soon they will have 50 year mortgages if these 40 year ones catch on.

  2. Reply
    February 22, 2011 at 7:15 pm

    You will pay far more interest over the life of the loan, and you will be dead before your home is paid off.

  3. Reply
    February 22, 2011 at 7:16 pm

    There must be more to it then paying more interest over the life of the loan. Most people won’t be there 30 years, so what is the problem with reduced monthly mortgage payments?

  4. Reply
    Jacque w
    February 22, 2011 at 8:04 pm

    I have a 40 year mortgage, and buying my first home left me unable to sleep once my offer was accepted. My mom, very successful has been at the top, bottom, and top again. Once I confided I was losing sleep over how I am going to make it on my own, and the amount of my mortgage weighing all the options available. She eloquently replied, what is your concern?

    How much I am paying- How I am going to make the payments and 30 or 40 years- What if I cant do it!!!!
    My mom said, who cares about how much you paid. You are buying a home you liked more then the others available. You make your rent on time, and you have found a way without ever borrowing it. 40 years or 90 years, tell me 1 thing you have from your childhood that hasnt been replaced. You bought your first house, take a 100 year loan since in 5 years you will be ready to move up. Dont say you cant do it, cause you did. Since you put up $ 10,000 its really done. Look at the payment options you have, not the rates, terms, or fees……That said and 6 months later I now own 2 houses:) yeah it can fall apart in a second, but I am sleeping better with my 40 year loan on 1 home and rent on the other covers the 30 year loan.

  5. Reply
    February 22, 2011 at 8:54 pm

    Interest rates are often higher and you do not always get the option to prepay points depending on the loan, which means your payments are not much lower every month. You trade 120 more payments for just a fraction of a discount.

  6. Reply
    February 22, 2011 at 9:15 pm

    There are several diffrent 40 year products available on the market right now (and yes, there are 50 years out there as well for the other poster.)

    Fannie Mae has a true 40 year loan… Identical to a 30 year fixed but only 40 years instead. The other 40 year loans are balloons. Your payment is based on a 40 year payment schedule but the loan is really due in 30 years. This type is offered by the sub-prime lenders and is not intended to be kept more than 2-5 years where as the Fannie Mae product is actually intended to be kept.

    What is the down side? You will pay more interest to the lender over the 40 years than with a 30 year loan.

    The upside? Your payment is almost as close to an interest only payment as you will get without actually having to pay for an interest only loan. Like the poster said, the rates really are not as important as the payment. Who cares if the rate is 1% or 15% if you can not afford either payment. With the 40 year amortization you should be able to make your payment since it will be reduced in comparison to the 30 year products.

    Also keep in mind this fact; the majority of people move within 10 years. They will most likely refinance once if not twice in this time period. What good is a 30 year fixed if you most likely will not be there or in that same loan for 30 years? Get the loan which makes the most sense for you and go with it.

    If you would like to discuss your specific scenario please drop me a line.

    Kevin 866-562-6838 x 106

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