When taking out a mortgage, one of the most important decisions is choosing the mortgage term. The term refers to the length of time over which you will pay back the loan. Most mortgages have terms of 15 or 30 years, but some lenders offer longer terms that can run as long as 40 years. So what is the longest mortgage term available? Let’s take a closer look at mortgage terms and how to decide which one is right for you.
Standard 15 and 30-year Mortgage Terms
The most common mortgage terms are 15 and 30 years. With a 15-year mortgage, you will pay off your home in 180 monthly payments over 15 years. The advantage is you pay less interest over the life of the loan because you’re paying it off faster. However, the monthly payments are higher than with a 30-year term.
A 30-year term means 360 monthly payments over 30 years. This lower monthly payment makes the loan more affordable for many borrowers. Of course, you pay more in total interest since you’re taking twice as long to repay the loan. Over three decades, interest costs can really add up.
Pros and Cons of 15 vs. 30 Years
Deciding between 15 and 30 years depends on your budget and goals:
- 15-year pros: Pay off mortgage faster, pay less interest overall
- 15-year cons: Higher monthly payment
- 30-year pros: Lower monthly costs, easier to qualify
- 30-year cons: Pay mortgage for longer, higher total interest
Generally, 15-year terms work well if you can afford the higher monthly payment in exchange for long-term interest savings and owning your home outright sooner. The 30-year term is a better choice if cash flow is tight or you need to keep monthly housing costs down.
Jumbo Mortgage Terms Up to 40 Years
Most conventional mortgages cap out at 30-year terms. However, a special category known as jumbo mortgages may offer extended terms up to 40 years. Jumbo loans are for luxury, high-cost properties over $647,200 as of 2023.
Going beyond 30 years reduces monthly payments even further. This helps high-income borrowers afford expensive real estate while maintaining their desired lifestyle. However, taking 40 years to pay off a mortgage results in massive interest costs over that time.
| Mortgage Amount | 30-Year Term | 40-Year Term |
|---|---|---|
| $1,000,000 | $4,770 monthly | $3,995 monthly |
| $2,000,000 | $9,540 monthly | $7,990 monthly |
As the table shows, extending from a 30 to 40-year term can reduce monthly costs by around 15% to 20%. But is it worth paying nearly double the interest?
The Downsides of 40-Year Mortgage Terms
There are a few big drawbacks to ultra-long 40-year mortgages:
- Much higher interest paid – Around double the total interest versus 30 years
- Still owe mortgage in retirement – Entering retirement age while still paying off your home is risky
- Difficulty paying off loan – Life circumstances may prevent you from paying off a 40-year term
- Higher interest rate – Longer terms often come with a slightly higher interest rate
Unless you absolutely need the lower payment, a 40-year mortgage probably does not make good financial sense for most borrowers. You give up decades of home equity build-up and pay exorbitant interest costs over the long run.
Should You Consider a Term Over 30 Years?
Here are some things to think about when deciding if you should get a mortgage term longer than the standard 30 years:
- How long do you plan to stay in this home? If not for the full term, extra years may not benefit you.
- Can you afford higher monthly payments? Shorter terms have lower lifetime costs.
- How stable and predictable is your income? Uncertainty argues for lower payments.
- Do you have a solid retirement plan? Owing mortgage payments into retirement age is risky.
Run the numbers carefully and think critically before committing to a jumbo mortgage over 30 years. The lower monthly payment may seem appealing, but can come back to bite you down the road.
Alternatives to Long Mortgage Terms
If you need to reduce monthly costs, there are alternatives to ultralong mortgage terms to consider:
- 15 or 30-year term – Make additional principal payments when possible to pay off faster
- ARM – Adjustable-rate mortgage with lower initial payments
- Biweekly payments – Accelerated payments reduce interest costs
- Pay points – Upfront fees buy down the interest rate
With discipline, you may be able to achieve a lower monthly payment, save on interest, and reach ownership faster through these other options.
The Longest Mortgage Term Available
To summarize the key points:
- Standard terms are 15 and 30 years
- Jumbo mortgages may offer terms up to 40 years
- 40-year loans reduce monthly costs but increase total interest paid
- Shorter terms have lower lifetime costs and risk
- Consider alternatives to make payments affordable before committing to a term over 30 years
In conclusion, while the longest mortgage term currently available is 40 years, this extended timeframe comes with substantial downsides for borrowers. A 30-year term or shorter is a better option for most home buyers seeking an optimal balance of affordable payments and long-term costs.