Would You Commit to a 40-Year Mortgage?

Taking on a 40-year mortgage might sound like a tempting way to ease the burden of high monthly repayments, but experts are warning it could end up costing borrowers a fortune in the long run.

New research from Finder shows that one in three Australians—around 6.2 million people—would consider stretching their home loan to 40 years just to make their repayments more manageable. While the idea of lower monthly costs might seem appealing, the extra decade on the loan could add hundreds of thousands of dollars in interest.

Right now, only a handful of lenders in Australia—SCU, Teachers Mutual Bank, and UniBank—offer 40-year mortgages, and they’re strictly for first-home buyers. Graham Cooke, Finder’s head of consumer research, says while these extended loans might help people break into the housing market, they come with a major financial sting.

“While 40-year loans do offer a lower-cost route to getting your first foot on the housing ladder, staying with them until the end can be very expensive,” Cooke explained.

On paper, a longer loan term lowers monthly repayments. For example, stretching a $641,416 mortgage from 30 years to 40 years could save borrowers about $300 per month. But the trade-off? An extra $316,000 in interest over the life of the loan.

Cooke knows firsthand how costly these loans can be. “I naively took out a 40-year loan when purchasing my first apartment, only to quickly realise how costly it would be in the long run,” he admitted. “Fortunately, I was able to sell the apartment a few years later.”

For those considering a mega mortgage, financial experts suggest looking at other options—such as making extra repayments or refinancing later—before committing to four decades of debt. After all, the dream of homeownership shouldn’t come at the cost of financial freedom.