Routing # 256078446
MORTGAGE KNOWLEDGE CENTER
PenFed Mortgage with Confidence
MORTGAGE
Is a 40-year mortgage a good idea?
What you'll learn: What a 40-year mortgage is and whether you should consider one.
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EXPECTED READ TIME: 3 MINUTES
January 8, 2024
Purchasing a home is a big financial decision. One of the ways homebuyers seek to make their purchase more affordable is the length of term they choose for their mortgage loan. That’s one of the reasons a 40-year mortgage can seem appealing. However, this term length comes with drawbacks that are important for you to consider.
If you’re considering a 40-year mortgage, it’s important to understand everything there is to know about them so you can evaluate all of your options when shopping lenders for a mortgage.
What is a 40-year mortgage?
More often than not, mortgage loan terms range from 15 to 30 years. Opting for a 40-year mortgage means that if you make all monthly payments without extra or larger payments made toward the principal, it will take you 40 years to pay off your home.
Is a 40-year mortgage a good idea?
If you’re on a tight budget, the slightly lower monthly payment on a 40-year mortgage can be tempting. However, a huge drawback is that you’ll be paying a lot more in interest over the life of the loan. Plus, there are few lenders who have 40-year mortgage options.
Let’s look at a side-by-side comparison of a 40-year mortgage versus a 30-year mortgage based on a $280,000 loan. (Note that the example below does not factor in added costs like homeowners insurance or property taxes.)
|
7.07% APR |
Monthly payment |
Total principal and interest paid |
|---|---|---|
|
40-year mortgage |
$1,754 |
$842,046 |
|
30-year mortgage |
$1,876 |
$675,370 |
With this example, you can see that you’d be paying $166,676 more in interest and principal on a 40-year mortgage compared to its 30-year counterpart. Many borrowers may not realize that paying an extra $100 per month could save them hundreds of thousands in the long run.
40-year mortgage rates
Despite the above example using the same rate, it’s more than likely that the interest rates for a 40-year mortgage will be higher than a 30-year mortgage. Of course, the rate you qualify for varies based on a number of factors, but you’ll have to pay for the privilege of having more time to pay back the loan.
Though the short-term savings on monthly payments may be tempting, it’s important to think long term when selecting your mortgage term.
For more information about PenFed Mortgages:
PenFed Mortgage:
866-807-0060
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Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.5 discount point, which equals 1.5 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.25 discount point, which equals 1.25 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.375 discount point, which equals 1.375 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.75 discount point, which equals 0.75 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
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