What is a 40 Year Fixed Rate Mortgage?

Is it time to pull money out of your home for an important expense? Is a 40 year fixed rate mortgage something you should consider? A 40-year fixed rate mortgage is a mortgage loan that has an interest rate that stays the same for the 40-year term of the loan. The principal amount is reduced, slowly at first, and then at a faster and faster pace, over the life of the loan until it is paid off.

The primary advantage of a 40-year fixed-rate mortgage is making monthly payments more affordable without taking on the risk of an adjustable rate. In addition to buyers in high-cost areas, the 40-year fixed mortgage also appeals to buyers with small down payments. Reducing the monthly payments on large loan amounts is accomplished by stretching the repayment term by an extra 10 year. Predictability is another big plus with the 40 year fixed rate mortgage. You know exactly how much interest you will pay over the term of the loan. The total monthly payment of principal and interest is fixed, and in early years it consists primarily of tax-deductible interest.

You never have more questions than when you are preparing your financial future. And its never more important to get an honest answer. Our trained loan professionals are ready to assist you with a quote and able to answer any question in a way that you can understand. One of the most often asked questions we get concerning a 25 year fixed rate mortgage is; “What are the extra costs of a 40 year fixed rate mortgage?”
40 years is a long time. Loans with longer terms charge higher rates because of the added time frame where a default may occur and because lenders and investors want paid for the longer period of time that their money is tied up.

Another question we get a lot is “Is a 40 year fixed-rate mortgage right for me?”

The answer is yes if you plan to live in your home for at least 10 years and you prefer a monthly payment that doesn’t vary, a fixed-rate mortgage may be your best choice, and also keep in mind your overall financial goals.

Recent news reports showed that Fannie Mae is engaged in a pilot program with select credit unions that could eventually make the product more widely available if Fannie considers adding this product to its portfolio.