40 Year Mortgage  

When your parents were young and wanted to buy a house it was much more difficult than it is today, they usually had to have 25% for a down payment, and they only had 25 years to pay off the loan. Nowadays when it comes to getting a mortgage we have more choices than ever before, in some cases it’s even possible to buy a house with no money down and pay it off with a 40-year mortgage.

I know what you’re thinking, “there’s no way I’m going to take 40 years to pay off my mortgage”! A 40-year mortgage has so many advantages and you don’t necessarily have to take the full 40 years to pay it off.

One of the benefits of a 40-year mortgage is that it helps first time home buyers by making it easier to qualify for their mortgage. Sometimes banks don’t accept all of the income that a person makes, for instance, if you have a full time job and a part time job for only 6 months. Banks will not accept the income you make on your part time job when they qualify you for a mortgage, as a result you will have to lower the purchase price of your house.

In a situation like this you could choose to amortize your mortgage over 40 years, it lowers the monthly payment and allows you to qualify for the house you really want. The good news is that most mortgages allow you to make a certain amount of extra payments on your mortgage without penalty, so even though you can take 40 years to pay it off you don’t have to.

There are other situations when a 40-year mortgage makes sense, and for first time home buyers it provides a little extra security. Many first time home buyers decide to purchase a home with another person and decide to take a 25-year mortgage because they can afford the payments, but what happens if one of them loses their job and can’t afford the payment anymore. In this situation if the couple had chosen a 40-year mortgage and increased their payment, instead of the 25-year mortgage, they would have the opportunity to lower their payment.

The 40-year mortgage gives you the best of both worlds, you can pay off the mortgage quicker if you want, and lower the payment back to 40 years if you need to.