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.

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