What are the Benefits of a 40-Year Mortgage?
In Australia, the average mortgage term is 30 years. However, some lenders offer 40-year mortgages. They operate just like a traditional loan, but you have longer to pay off your loan. The biggest benefit for borrowers is that they have lower monthly repayments than they would with a 30-year term. However, due to the extended loan term, you end up paying more interest overall.
Benefits of a 40-Year Mortgage
Before applying for a 40-year mortgage, you should consider the following benefits:
- Lower monthly repayments
- You can purchase a larger house with a smaller income because the monthly repayments are lower
- You will have more disposable income every month
- Many of these mortgages offer variable interest rates, allowing you to save money when the interest rate is lower.
Drawbacks of a 40-year Mortgage
You should also consider the following drawbacks before applying for a 40-year mortgage:
- While you may have lower monthly repayments, you end up paying more interest over the life of your loan.
- You may be able to realistically afford a more expensive home due to the smaller repayments, but you may still be denied if your income is too low.
- You will not generate as much equity as soon as you would with a shorter loan term.
- If you sell your home, you may not make up the difference in what you overpaid in interest.
At Mortgage House, we offer a variety of 40-year mortgages, including package loans, variable rate loans, and low doc loans. Contact us today to find out more.