Longer loan lengths can provide immediate financial relief, but they come at a cost. Find out why VA loans don't extend beyond 30 years and the potential drawbacks of choosing a longer mortgage term.
A 40-year mortgage is a type of long-term home loan with a repayment period of 40 years.
Borrowers make monthly payments towards their home loan for a total of 480 months, which is 120 months longer than the standard 30-year mortgage.
Can I get a 40-year VA Loan?
As of 2013, the maximum VA home loan term is 30 years and 32 days.
VA Loan Lengths
The most common VA loan repayment terms are 15 and 30 years. However, some lenders may offer VA loans with non-standard terms, such as 10-year, 20-year, or 25-year mortgages. In general:
| Shorter VA Loan Length | Longer VA Loan Length |
| Higher monthly payment | Lower monthly payment |
| Lower interest rate | Higher interest paid |
| Less interest paid over the life of the loan | More interest paid over the life of the loan |
Though this is generally the case, VA loan terms are also affected depending on whether you are seeking a fixed or adjustable interest rate.
Why VA Loan Terms Stop at 30 Years
The VA's decision to get rid of 40-year mortgages is based on the idea that there's simply less risk for both borrowers and lenders when mortgages are paid down in a timely fashion.
With a 40-year mortgage, we trade low monthly payments for tiny debt reductions each month. This may sound attractive from an affordability perspective, but when it comes time to repay, far more will be due at closing with a 40-year loan than a mortgage with a 15 or 30-year term.
Shorter vs. Longer Mortgage
The shorter loan term allows the borrower to pay off the loan more quickly and build home equity faster while saving a substantial amount on interest expenses over the life of the loan.
| 15 Year | 30 Year | 40 Year | |
| Loan Amount | $250,000 | $250,000 | $250,000 |
| Interest Rate | 6% | 6.75% | 7.25% |
| Monthly Payment | $2,124.68 | $1,625.78 | $1,699.42 |
| Total Interest Paid | $58,842.16 | $195,280.45 | $309,790.59 |
| Total Cost of Loan | $308,842.16 | $445,280.45 | $559,790.59 |
The trade-off of opting for a longer loan length, like a 30-year or 40-year mortgage, boils down to lower monthly payments versus higher overall costs.
Pros of a Longer Mortage
On the positive side, longer loan terms offer immediate relief through more manageable monthly mortgage payments, opening up homeownership opportunities for those who might not afford the steeper payments associated with shorter-term loans.
This lower monthly obligation can also ease financial strain and provide a safety net for unexpected expenses, promoting a sense of financial stability.
Cons of a Longer Mortgage
However, the downside is that, over time, longer loan terms result in significantly higher total interest payments. Even if the interest rate is relatively low, you'll end up paying a substantial amount in interest over the extended repayment period, which can substantially increase the overall cost of your home.
If you are considering a 40-year mortgage, remember that this is not possible for a VA Loan. This means you cannot access the VA loan benefits of a $0 down payment mortgage with no loan limit for a 40-year loan. Overall, the trade-off between a longer loan length and lower monthly payments should be carefully considered, taking into account your long-term financial goals and budgetary constraints.
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