The primary benefit of a 40-year program fixed rate mortgage is lower payments, which means that it opens up the possibility of home ownership to a much larger demographic. Thanks to new 40-year program mortgage programs, renters are finding that they can more easily become homeowners; homeowners wishing to upgrade to a new home are discovering that they can now afford much more; and those who may have a difficult time qualifying for a shorter term loan may find that the 40-year program fixed rate mortgage is something that they can qualify for, based on the standard mortgage industry requirement of a low debt-to-income ratio.
The downside to 40-year program mortgages is that because they are for a longer term, borrowers end up paying more interest. In other words, you'll be paying more for a home financed with a 40-year program fixed rate mortgage in the long run than you would with a 30-year term loan-10 more years worth of interest, in fact.
More interest means less equity. Since more interest is attached to the loan, each monthly payment will contribute less to the principal than it will to the amount of the interest. Therefore, the longer the mortgage period, the longer it takes to build equity in your home.
However, since the majority of homeowners pay off their home loans early, it's possible that a borrower wouldn't have to pay interest on the entire term of the loan anyway. That often makes 40-year program fixed rate mortgages good alternatives for people who are only planning on owning their home for a short time or who are buying homes in an area that is appreciating rapidly.
40-year program mortgage rates are calculated based on current market standards.
Generally speaking, 40-year program mortgage rates run about one-quarter to one-half of a percentage point higher than a 30-year fixed rate loan.
Likewise, interest rates for 40-year program adjustable rate mortgages also vary, yet they are established with an introductory rate which lasts from 3 to 10 years, and then adjusts annually afterward based on the market.
The best way to find out what the current rates are is to use a 40-year program mortgage calculator . Many online lenders and financial web sites (such as http://mortgages.interest.com) offer online mortgage calculators for free.