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Yes, you can now get a 40-year mortgage ... but should you?

Traditionally, 15- and 30-year mortgages have been available. Now, you can extend payments over 40 years under a new program.
Yes, you can now get a 40-year mortgage ... but should you?
Posted at 10:02 AM, Mar 10, 2023

This week, the Federal Housing Administration gave the OK to 40-year mortgages. It's a move designed to make owning a home easier for first-time buyers.

"If it helps people get into a house, it's a good thing," Sonsire Gonzalez, a real estate agent in Port St Lucie, Florida, said.

The idea is to reduce monthly mortgage payments, which have been rising as mortgage rates go up.

Redfin.com reports over the last year, the average mortgage payment has risen 30% to a record $2,563 a month.

"Forty-year mortgage stretches out that payment over a longer period of time, so it makes for a lower payment, which is what a lot of buyers need right now," Gonzalez said.

Bankrate.com recently compared 30- and 40-year mortgages and found on a $312,000 loan at 6.85% interest, the monthly payments were $2,044 for 30 years and $1,904 for 40 years.

The extra 10 years also added more interest, close to $170,000 more, but in the short term, experts said it can make a difference, especially since many homeowners hardly stay in one house for 30 or 40 years.

"It's going to attract buyers struggling to put their money together for getting into a house, like a first-time home buyer, and it's great because it saves them from wasting money on rent," Gonzalez said.

Bottom line: If you can afford a 30-year mortgage, you'll save a significant amount on interest. But if extending payments over 40 years is the difference between renting and buying, experts say home buying is still the better option.

This article was written by Matt Sczesny for Scripps News West Palm Beach.