40-year Fixed-Rate

Pros
This is a standard fixed-rate loan with a 40-year term. The loan term allows you to have lower monthly payments: For example, $100,000 at 5% interest with $0 down would be $537 with a 30-year fixed-rate loan, versus $482 with a 40-year loan.

In addition, it might allow you to secure a higher loan amount and still have a manageable payment. Utilizing the above example, the payment on an $110,000, 40-year loan at 5% would equal $530, which is comparable to the $537/month payment on a $100,000 30-year fixed-rate mortgage at 5%.

Another upside to these loans is that because Fannie Mae has begun purchasing them on the secondary market, they are likely to become increasingly available from lenders.

Cons
The longer the term, the more you pay towards interest. Not only are the interest rates on these loans slightly higher, but you’ll end up paying nearly twice as much interest over the term compared to what you would pay with a standard 30-year fixed-rate loan. In addition, these loans are not yet readily available as 30-year mortgages.