The large national banks do not offer 40-year mortgages. To answer what banks offer 40-year mortgages in practical terms: you’re looking at portfolio lenders, credit unions, and non-bank mortgage companies that specialize in non-Qualified Mortgage products. Names that have written 40-year loans include Rocket Mortgage, Carrington Mortgage, Newrez, NewFi Lending, and Needham Bank, though availability shifts frequently and terms vary lender to lender.
Where To Actually Find One
Skip the big banks. They originate loans built for sale to Fannie Mae or Freddie Mac, and both agencies cap eligible terms at 30 years. A 40-year loan has to stay on the lender’s own books, so it lives almost entirely in the portfolio-lending world.
Three channels are worth your time:
- Credit unions and smaller community banks. Many already operate as portfolio lenders and offer products they don’t heavily advertise online. Calling local branches directly often surfaces options a web search will not.
- Non-bank mortgage companies focused on non-QM lending. These firms specialize in loans that don’t fit the standard mold, including extended-term, interest-only, and bank-statement-qualified products.
- Mortgage brokers who work with non-QM lenders. Because the 40-year market is fragmented and lenders enter and exit it regularly, a broker is often the fastest path to a live rate quote.
Plan to contact several lenders before finding one with a 40-year option in your area at terms you find acceptable. The named lenders above have offered these loans, but a product available last quarter may not be on the rate sheet today.
Why Big Banks Don’t Offer Them
Two forces keep 40-year mortgages on the fringe. The first is the secondary market. Fannie Mae and Freddie Mac will not purchase a mortgage with an original term longer than 30 years, so any lender writing one has to hold it or find a private buyer. That ties up capital and limits how many any single institution can carry.
The second is federal regulation. Under the Consumer Financial Protection Bureau’s Ability-to-Repay rule, a Qualified Mortgage cannot have a term exceeding 30 years.1eCFR. 12 CFR 1026.43 – Minimum Standards for Transactions Secured by a Dwelling QM status gives lenders a legal safe harbor against later claims that they failed to verify a borrower’s ability to repay. A 40-year loan forfeits that protection, which is a strong disincentive for any bank with a conventional lending pipeline to protect.
For you as a borrower, the non-QM label means the loan is more likely to include features prohibited in Qualified Mortgages, such as interest-only periods or balloon payments.2Consumer Financial Protection Bureau. ATR/QM Small Entity Compliance Guide Most reputable portfolio lenders still verify income, assets, and employment thoroughly, but the product itself carries more variation.
What “40-Year Mortgage” Actually Means
The phrase covers very different products. A 40-year loan spreads principal repayment across 480 monthly payments instead of 360, which reduces the monthly bill. What varies is everything else. Read the loan note carefully before closing, because these features change the risk profile:
- Balloon payments. Some 40-year products require a large lump-sum payment partway through the term, often after 10 or 15 years. If you cannot pay it or refinance at that point, you face default.3Consumer Financial Protection Bureau. What Is a Balloon Payment? When Is One Allowed?
- Interest-only periods. Some lenders offer an initial phase where you pay only interest and build zero equity. When it ends, your payment jumps because you now amortize the full balance over fewer remaining years.
- Adjustable rates. A 40-year loan may start with a fixed rate for five or ten years and then adjust periodically.
A fully amortizing fixed-rate 40-year loan and a 40-year loan with a 10-year balloon and an adjustable rate are worlds apart. Ask directly which one you’re being offered.
The cost trade-off is real. Rates on 40-year loans typically run higher than 30-year rates, and stretching principal repayment across an extra decade adds substantial lifetime interest. On a $400,000 loan at 7%, the monthly payment drops by roughly $170 compared with a 30-year term, but total interest paid rises by about $237,000. Equity also builds more slowly: after ten years of on-time payments, a 40-year borrower has paid down roughly $20,000 less principal than a 30-year borrower on the same balance.
Who Qualifies
Each portfolio lender sets its own rules, so qualification standards vary more than they do for conventional loans. There is no published guideline the way Fannie Mae issues one for conforming loans. Most lenders look at the same core factors:
- Credit score. Some portfolio lenders accept scores in the low 600s; others set the floor at 680 or higher depending on down payment and compensating factors.
- Down payment. Some programs require as little as 3% to 5% down; others expect 10% to 20%, particularly when credit is weaker.
- Debt-to-income ratio. This is the single most common reason borrowers pursue a 40-year term. Portfolio lenders often allow DTI up to 45% or 50%, giving room the typical conventional ceiling doesn’t.
Self-employed borrowers and those with non-traditional income are a large share of this market. Many portfolio lenders accept bank statements as income documentation instead of tax returns or W-2s, which helps business owners whose tax filings understate their actual cash flow.4Bankrate. Bank Statement Loan: What It Is And Who It’s For Expect a thorough review of your finances regardless of documentation method.
The FHA 40-Year Option Is Not for Purchases
One government-backed path to a 40-year term exists, but it is not a product you can shop. In 2023, HUD introduced a permanent 40-year loan modification option for borrowers with existing FHA-insured mortgages who have fallen behind on payments.5HUD. Mortgagee Letter 2023-02 The servicer extends the remaining balance across a new 40-year term to reduce the monthly payment and help the borrower avoid foreclosure. It is a loss-mitigation tool. If you’re buying a home, this program is not available to you.
When It’s Worth Doing
A 40-year mortgage works best when a 30-year payment on a home you can genuinely afford pushes your DTI just over the lender’s line, or when you plan to refinance into a shorter term within a few years and want the lower payment as a bridge.
Where it goes wrong is using the lower payment to buy more house than the budget really supports. Slow equity buildup leaves little cushion if home values dip, and selling early can mean bringing money to closing. Refinancing into a better loan later is never guaranteed.
If you’re pursuing one, get quotes from at least three portfolio lenders. Ask each whether the loan is fully amortizing or includes a balloon, whether the rate is fixed or adjustable, and whether there is an interest-only period. Those answers matter more than the 40-year label.