That’s right, some lenders are offering 40-year home loans. Unsurprisingly, most of these lenders are targeting first home buyers for these 40-year mortgages because first home buyers have the gift of time on their side.

While a 40-year home loan may help to ease the financial burden for borrowers through a smaller repayment amount, there’s a pretty big catch. Because the loan term is longer, borrowers generally end up paying a much higher amount of interest in total (up to hundreds of thousands of dollars extra). 

40-year mortgage lenders

Currently, only a handful of lenders in Australia offer 40-year home loans, four of which are customer-owned banks (e.g. credit unions and building societies), while two are non-bank lenders. To date, none of the major banks offer a 40-year maximum loan term.

But some first home buyers are turning to these longer loan terms in a bid to try and get a foothold in expensive property markets. 

So are 40-year home loans worth considering? Or are they a recipe for financial ruin? Let’s start by looking at how 40-year home loans work.

40-year home loan vs 30-year home loan

A 40-year home loan works in much the same way as any other home loan, really – you’re just paying off the loan slower, which means your repayments are smaller. 

But with the debt stretched out over a longer time period, you'll be racking up significantly more interest on that debt. So the short-term savings you may make on the monthly repayments is likely to be negated by the extra interest you’ll pay over the life of the 40-year loan versus a 30-year loan, as demonstrated below. 

30-year home loan 40-year home loan
Loan: $400,000 $400,000
Interest Rate: 4.5% p.a. 4.5% p.a.
Monthly Repayment: $2,026.74 $1,798.25
Total Loan Payment: $729,626.85 $863,160.65
Total Interest Cost: $329,626.85 $463,160.65

As you can see from the mock example above, you might pay $228.49 less per month on a 40-year home loan, but you are paying $133,533.80 more interest over the life of the loan compared to a 30 year loan.  

Types of 40-year home loans

In Australia, there are three main loan types that are available for 40-year home loans. You're very unlikely to find any fixed-rate loans offered for 40-year home loans in Australia.

Low-doc home loans

Low-doc home loans, or low documentation home loans are ideal for people who are self-employed or who don’t have the correct proof of income documents available at the time (or can’t get them at all).

But these loans can attract higher interest rates to offset the risk to the lender, and they’re not very common anymore. 

Variable rate home loans

A variable rate home loan is a home loan where your interest rate will move (or vary) with changes to the market. This means your interest rate can either rise or fall over the term of your loan. 

Variable rate home loans also have appealing features such as the ability to make extra repayments to pay off the loan sooner and save you interest. 

Compare variable home loan rates

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
Principal & Interest
Featured Online ExclusiveUp To $4K Cashback
  • Immediate cashback upon settlement
  • $2,000 for loans up to $700,000
  • $4,000 for loans over $700,000
5.99% p.a.
5.90% p.a.
Principal & Interest
Featured Apply In Minutes
  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

Package home loans

Package home loans involve combining your home loan and other financial products together. Package home loans usually come with interest rate discounts and additional incentives, but they typically also have an annual package fee which can be several hundred dollars. 

Some package home loans allow borrowers to take out a home loan for a 40-year period.  

Pros and cons of a 40-year home loan

There are pros and cons when it comes to 40-year home loans – the biggest con being the mountains of extra interest you’ll end up paying.

Pros Cons
The minimum monthly repayments are lower Your total interest costs will likely be hundreds of thousands of dollars extra, which you may struggle to make back if you sell the property. 
Can be attractive to first home buyers who may initially struggle to afford home loan repayments, but have time on their side to pay off the loan at their own pace  It will take longer to build equity in the property, unless you make additional repayments
You may be able to afford a better house, as you can afford to make the lower repayments  Fewer loans to choose from since only a handful of lenders offer 40-year mortgages
Lower mortgage repayments can free up extra cash for other life purchases The interest rates on 40-year mortgages aren’t as attractive as some of those available on 25 and 30-year mortgages.’s two cents

We’ve got a lot to say about 40-year home loans – in particular, why they can be a really, really bad idea. 

Forty years is almost all of an average working life, meaning that many people who take out these loans will be retired before they’ve even paid it off. And the fact that APRA, and many institutions, regard 40-year home loans as a risky product should tell you enough.

A 40-year mortgage might mean your monthly repayments are lower – but any savings you might make there can be completely offset by the fact that you’re paying hundreds of thousands of dollars extra in interest over the life of the loan. That’s because you’re stretching out the loan for an extra decade, so the bank gets to charge interest for an extra decade. And as you can see, ten years of compounding interest is a lot of money (to the tune of hundreds of thousands of dollars. HUNDREDS OF THOUSANDS). 

Are those smaller monthly repayments really worth it in the long run if you’re paying that much more in interest? 

The decision to take out a 40-year home loan is personal and entirely your decision to make. However, at we’re of the belief that it’s better to scrimp and save so that you can pay off your home loan as fast as possible – even if it means living a more frugal lifestyle for a few years while you do so. 

Besides, there are many other ways you can save money on your home loan without resorting to stretching out the payments over a 40-year home loan. You can refinance your loan to a lower rateutilise an offset account, make extra repayments, or make more frequent fortnightly or weekly repayments instead.

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