The rising interest in 40-year home loans is being driven by growing affordability challenges. In this article, we’ll take an in-depth look at the 40-year mortgage: its key benefits and drawbacks, where it’s available, which lenders offer it, and how it compares to more traditional loan terms. We’ll also answer common questions, explore who this loan type is best suited for, and provide access to calculators so you can estimate your potential repayments over 40 years. Whether you’re a first-time buyer or just exploring flexible loan options, this guide will help you make an informed decision.
Let’s dive in
What Is A 40 Year Mortgage?
A 40-year mortgage lets you repay your home loan over 40 years, giving you much more time than the usual 25 to 30-year terms most lenders offer in Australia. By stretching out the loan, you can lower your monthly repayments—making it easier to manage your budget. This option can be especially helpful if you’re a first-home buyer or if your borrowing capacity is tight.
How Does A 40 Year Mortgage Differ from Standard Loan Terms?
The key difference between a 40-year mortgage and a standard 25- or 30-year mortgage is the repayment period. With a longer time frame to repay the loan, each monthly instalment is lower than it would be for a shorter-term mortgage of the same loan amount. For some Australians, this can make budgeting more manageable, especially in high-cost housing markets like Sydney or Melbourne.
However, a longer mortgage term doesn’t come without downsides. While your monthly repayments are reduced, the overall duration of the loan means you will pay more interest over time. This can make the total cost of borrowing substantially higher compared to a standard-term loan.
How Do Repayments Compare?
You’ll usually pay less each month with a 40-year mortgage than with a 25- or 30-year loan because the repayments stretch over a longer period. For example, if you borrow $600,000 at 6% interest, your monthly repayments will be much lower over 40 years than over 25. This could work well if you’re trying to cut monthly costs or boost your borrowing power to buy a more expensive home.
But remember—those lower repayments come with a trade-off. Because the loan runs longer, you’ll pay off the principal more slowly. In the early years, most of your repayment goes toward interest, not the loan itself.
How Much More Interest Will You Pay?
Over a 40-year term, you’ll end up paying much more in total interest than you would with a shorter loan. Using that same $600,000 loan example, the interest you pay over 40 years could add up to hundreds of thousands more compared to a 25- or 30-year loan. The longer your loan runs, the more time interest has to build up—pushing up the total cost of your mortgage.
So, while your monthly repayments might feel easier now, the long-term cost hits harder. You’ll want to think this through carefully—especially if you plan to keep the property for the full 40 years.
Why 40-Year Mortgages Are Gaining Attention In Australia
Cost of Living & Rising Interest Rates
Australians continue to face steep living costs—from housing and groceries to fuel—with wage growth struggling to keep pace. The Reserve Bank’s interest rate increases in recent years have also made mortgage repayments more burdensome, leading to heightened financial pressure across households.
Housing Affordability Crisis
Australia’s property market remains a formidable barrier, especially for first-home buyers. In Sydney, the median house price is now 14.7 times the median New South Wales wage—surpassing the unaffordability levels seen in Hong Kong. The Guardian reported that key workers, such as teachers and aged-care workers, are unable to save for a deposit without enduring “significant financial stress.”
Rising Interest Driving Long-Term Loans
Recent research by Finder showed that 30 per cent of Australians (about 6.2 million people) would consider a 40-year home loan if it meant reducing their monthly repayments.
Impact on Monthly Repayments & Long-Term Costs
The average home loan of $641,416 sees its monthly repayment reduced by over $300 when extended from 30 to 40 years—but it also adds approximately $316,000 in interest over the life of the loan.
First-Home Buyers & Extended Terms
With soaring prices, many young Australians—especially those older than 36—face decades of mortgage repayments stretching into retirement. Long-term loans are becoming a lifeline for those priced out of the market—but the real cost could be way more than anticipated.
Can You Get A 40-Year Mortgage in Australia?
Legal Availability
Yes—you can get a 40-year mortgage in Australia, although these products are still quite niche. Australian home loans are typically structured over 20–30 years, but lenders have begun offering longer terms—including up to 40 years—to support borrowers facing affordability pressures.
Limited Lender Adoption
Not all lenders offer 40-year terms. In fact, only a “small handful” provide them, including certain niche banks and credit unions such as RACQ Bank, G&C Mutual Bank, and Australian Mutual Bank, alongside a few of the major players. Most lenders avoid these extended terms due to heightened risk. Regulators consider it risky to borrow over such durations, as it spans nearly an entire working life, with the borrower potentially retiring before the loan is paid off.
Regulatory Guidance from APRA & ASIC
APRA’s Prudential Practice Guide APG 223 does not prohibit 40-year terms but emphasises that lenders should manage risk carefully—incorporating serviceability buffers, conservative assessments, and proper underwriting of higher-risk loans, which would include long-duration mortgages.
According to ASIC’s Responsible Lending Guide, lenders must ensure any loan meets the needs and objectives of the borrower—including their capacity to repay over such an extended term. So, while a 40-year mortgage is legal, it’s only offered when the bank is confident a borrower can sustain repayments and manage risk.
Best 40‑Year Mortgage Options in Australia
Leading Lenders Offering 40‑Year Loans
Westpac
- Scope: Currently piloting 40‑year mortgages for select high-income professionals—marking a cautious entry by a major bank. This move shows Westpac is testing demand before a wider rollout. If successful, it could open the door for other major banks to follow.
- Current variable package rate: ~6.24% p.a. (owner-occupier) for 70–80% LVR Premier Advantage Package; ~6.44% for investors. Rates are subject to change based on your profile and LVR. Always check comparison rates to understand the true cost.
- Key features: Up to 10 offset accounts, online calculators, and video consultations. These tools help you manage repayments more efficiently. However, eligibility is still limited and focused on specific borrower types.
Pepper Money
- Scope: Australia’s first widely available 40‑year mortgage provider—from late 2024. Pepper stepped into the gap left by traditional banks. It caters to buyers needing flexibility in repayments over time.
- Variable entry rates:
- Prime: 6.29–8.29% p.a. (6.47–8.35% comp rate)
- Near-prime: 6.99–10.24% p.a.
- Specialist: up to 11.94% p.a.
- These rates vary depending on your credit history and income. Make sure you understand which category you fall into before applying.
- Key features: 100% offset account, unlimited extra repayments, no break fees. You can pay off the loan faster without penalty. Their flexible structure makes it easier for self-employed and non-standard borrowers to qualify.
Credit Union SA
- Scope: Offers the XL Home Loan with a 31–40‑year term—tailored to first-home buyers in South Australia. It’s ideal if you want lower monthly repayments early on. It also supports buyers building new homes.
- Rates: XL Variable ≤ 60% LVR has an interest rate of 5.54% and a comparison rate of 5.92%. These rates are competitive, especially for buyers with higher deposits. Keep in mind that the higher the LVR, the higher the rate and risk.
- Key features: Construction loans, offset accounts, extra repayments. You get the benefit of managing repayments flexibly while building equity. It’s a strong option if you’re planning to live in SA long-term.
Other Smaller Lenders
- Scope: G&C Mutual Bank, Australian Mutual Bank, and RACQ Bank offer 40‑year terms with more flexible lending criteria. These lenders often have a more personal approval process. They may consider applicants turned away by the big banks.
- Rates: Typically range between 6% and 7%, depending on the product and borrower profile. You may find slightly higher interest rates, but the trade-off is easier access to credit. Always review the loan structure carefully.
Key features: More flexible assessments, regional focus, and customer-first approach. Many offer helpful tools like redraw facilities and flexible repayment options. They can be a solid choice if you’re looking beyond the big banks.
Summary Table
Lender Type | Rates | Flexibility | Eligibility | Availability |
Big Banks (Westpac) | ~6.4–6.6% p.a. | Off‑set, redraw; pilots | High-income professionals | Very limited pilot |
Non-Banks (Pepper Money, G&C, CU SA) | 6–7%+ p.a. | Standard features | Broader borrower profiles | Widely available |
Fintech (Tiimely, Alex) | 5.9–6.2% p.a. | Digital convenience | General borrowers | 25–35-yr terms; no 40 yet |
40 Year Mortgage Australia: Pros and Cons
Thinking about a 40-year mortgage in Australia? This extended loan term can lower your monthly repayments and help you get into the property market sooner—but it also comes with long-term costs. In this section, we’ll break down the key pros and cons so you can decide if it’s the right fit for your financial goals.
Pros of a 40-Year Mortgage
1. Lower Monthly Repayments
You’ll notice one big benefit straight away—your monthly repayments drop. By stretching your loan over 40 years, you make smaller payments, freeing up cash for everyday expenses like childcare, groceries, or school fees. That breathing room can make all the difference during tough times.
For example, turning a $600,000 loan from 30 to 40 years could cut your monthly repayments by a few hundred dollars. That extra space in your budget could be the reason you buy now instead of renting longer.
2. Improved Serviceability
With lenders tightening rules, they’ll look closely at how easily you can afford repayments. A longer loan term makes those repayments smaller, which can help you pass their serviceability test. That means you might qualify for a loan that would’ve been out of reach on a 25- or 30-year term. This is a game-changer if you’re juggling big living costs, irregular income, or multiple debts.
3. Short-Term Home Ownership Accessibility
If you’re struggling to break into the property market, a 40-year loan could open the door. Yes, you’ll pay more long term—but getting a home now, rather than waiting years to save more, could be worth it.
This approach makes sense if you’re younger and expect your income to grow, giving you the option to refinance to a shorter term down the track.
Cons of a 40-Year Mortgage
1. Significantly Higher Interest Over Time
Here’s the catch—you’ll pay a lot more interest overall. Even if your rate stays the same, adding 10 more years adds thousands to your loan.
On a $640,000 mortgage at 6.5%, switching from a 30-year to a 40-year term could cost you over $300,000 more in interest. That’s a serious long-term cost to think about.
2. Slower Equity Building
In a 40-year loan, most of your early repayments go to interest—not the loan itself. That means it takes much longer to build equity in your home.
This can hold you back if you want to refinance, upgrade, or sell during a market downturn.
3. Debt Into Retirement
If you don’t make extra repayments or refinance, you could still be paying your mortgage well into your 70s. That’s a big red flag for your retirement plans.
For anyone in their 40s or 50s, this setup might leave you heading into retirement with mortgage debt—something most financial experts warn against.
4. Not Ideal for Older Borrowers
Most lenders won’t offer a 40-year term if you’re already over 40—unless you show a clear plan to pay it off early. That might include using super, inheritance, or selling other assets.
So, this loan type works best if you’re younger and have decades of working life ahead of you.
Who Is A 40-Year Mortgage Suitable For?
A 40-year mortgage isn’t for everyone—but for some borrowers, it can be a strategic way to improve affordability and achieve homeownership sooner. Understanding who benefits most from this extended loan term can help you decide whether it aligns with your financial goals and life stage.
First-Home Buyers Struggling with Serviceability
If you’re a first-home buyer finding it hard to meet tough lending rules, a 40-year mortgage might help. In cities like Sydney, Melbourne, and Brisbane, rising property prices often push buyers out because lenders won’t approve loans based on a 25- or 30-year term.
By choosing a 40-year loan, you lower your monthly repayments and boost your borrowing power. This helps you qualify for a home loan sooner—instead of spending years saving or waiting for prices to drop.
But remember, stretching your loan means you’ll pay more interest overall and build home equity more slowly. Make sure it fits your long-term financial goals.
Younger Borrowers in Their 20s and Early 30s
If you’re in your 20s or early 30s, a 40-year mortgage might fit your stage of life perfectly. You’ve got decades of earning potential ahead and can expect your income to grow as your career progresses.
You can treat the 40-year term as a stepping stone—get into the market now, then refinance to a shorter term once your income improves or you’ve built up some equity. Since time’s on your side, you’re also less likely to carry this debt into retirement, especially if you make extra repayments.
Plus, many young buyers value getting into the market today more than waiting for perfect conditions.
Investors with Long-Term Horizons
As a property investor, you can use a 40-year mortgage to boost your cash flow—especially if your focus is long-term capital growth, not short-term equity. Spreading repayments over a longer term lowers your monthly costs and helps you manage your portfolio more effectively.
For instance, with smaller repayments, you might be able to cover maintenance, strata fees, or even invest in another property. If your investment grows in value over time, paying more interest upfront may be worth it.
Plus, interest on investment loans is usually tax-deductible, which can reduce the impact of higher interest costs in the long term.
Borrowers Prioritising Cash Flow
If you value cash flow more than building equity quickly, a 40-year mortgage could work in your favour. During times of job changes, financial stress, or major life events like starting a family, keeping repayments low can make a big difference.
With smaller, predictable monthly repayments, you’ll have more room in your budget to cover essentials or enjoy some lifestyle flexibility. While you’ll pay more interest over time, the peace of mind and breathing space today might be exactly what you need.
A 40-year mortgage is not a one-size-fits-all solution. But for the right borrower—especially younger Australians, first-home buyers, and strategic investors—it can offer real value. Like any loan product, it’s crucial to match the mortgage term to your broader financial goals. If you’re unsure whether this path suits you, consider speaking with a mortgage broker or financial adviser who can help you run the numbers and explore alternatives.
Alternatives To A 40-Year Mortgage
A 40-year mortgage can lower your monthly repayments and boost borrowing power—but it’s not your only option. In fact, other strategies may suit your goals better without locking you into a longer loan. Let’s explore some smart alternatives that can help you buy sooner, save more, and stay flexible.
Interest-Only Loans: Reduce Payments Temporarily
Interest-only loans let you pay just the interest for a set period—usually 1 to 5 years—cutting repayments in the short term. This can ease cash flow while you sort out finances or settle into a new job.
But there’s a catch—you’re not paying down the loan, so your debt stays the same. Once the interest-only period ends, repayments jump. Lenders also check carefully to make sure you’ll manage the increase.
Family Guarantees: Boost Borrowing Power
With a family guarantee loan, a parent or relative uses their home equity to back part of your loan. This can increase your borrowing power and help you avoid lenders mortgage insurance (LMI).
It’s a great way for first-home buyers to get into the market sooner—without needing a big deposit or longer loan. But remember, your guarantor’s property is at risk if you fall behind on repayments.
Shared Equity Schemes: Buy a Share, Enter Sooner
Shared equity programs—offered by governments and some developers—let you buy part of a property, with a partner owning the rest. This cuts your loan size and deposit, making repayments more manageable.
While you don’t own the full home upfront, you can increase your share over time. It’s a helpful path into the market, especially if you’re priced out of buying on your own.
Rentvesting: Invest Where It's Cheaper
With rentvesting, you rent where you want to live—but buy where you can afford. It’s popular with younger buyers who want flexibility but still want to build wealth through property.
This lets you start investing without overstretching. Over time, you can grow equity and eventually upgrade to your dream home or location.
No Deposit Home Loans: Enter the Market Faster
No-deposit home loans let eligible buyers borrow up to 100% of a property’s value—usually with help from a guarantor or special lender programs. This means you don’t need to save a large deposit.
While this speeds up your entry into the market, it comes with higher risk and stricter lending criteria. You’ll also pay more interest over time, so make sure it fits your long-term goals.
Government Schemes: Support for First-Home Buyers
Government support programs like the First Home Guarantee or First Home Owner Grant can help you buy with a smaller deposit and reduced upfront costs. Some schemes even remove the need for LMI.
These schemes are ideal for first-home buyers who are struggling to save but are ready to purchase. Eligibility varies, so it’s worth speaking with a mortgage broker to see which options apply to you.
The Importance of Personalised Advice
Choosing a 40-year mortgage depends on many personal factors like your income growth, life stage, risk tolerance, and property goals. Because what suits one borrower may not suit another, getting personalised advice is essential.
Mortgage brokers and financial advisers can help you compare loan products, understand the true cost of longer terms, and explore alternatives such as interest-only loans, family guarantees, or shared equity schemes that might better fit your situation.
Before committing, talk to a qualified broker who can access a wide range of lenders and explain fees, eligibility, and features. Getting expert advice early helps you avoid costly mistakes, find the right loan, and plan for efficient home repayment.
FAQs About 40-Year Mortgages in Australia
Can you get a 40-year mortgage in Australia?
Yes, but options are limited. Some lenders like Westpac offer them for specific situations like loan portability. These loans are not widely advertised and often come with stricter eligibility criteria. It’s best to check directly with lenders or mortgage brokers to explore if you qualify.
What is the longest mortgage in Australia?
Typically, 30 years is the standard, but some lenders now offer up to 40 years, depending on eligibility. The 40-year term option is relatively new, and not all lenders provide it. Longer terms reduce monthly repayments but increase the total interest paid over the life of the loan. Borrowers should carefully consider their long-term financial plans before choosing an extended term.
How old do you have to be to get a 40-year mortgage?
You generally need to be young enough that the loan does not extend past retirement age. Many lenders cap the age at about 70–75 at the end of the loan term. This is to ensure the borrower can reasonably meet repayments over the loan period. Age limits may vary, so it’s important to confirm with each lender.
Does HSBC do 40-year mortgages?
Currently, HSBC Australia does not offer 40-year mortgage terms. Their maximum term is typically 30 years. However, product offerings can change, so it’s worth checking HSBC’s current loan products regularly. Some lenders may offer longer terms as part of specialised or portfolio lending.
Can I refinance my existing home loan to a 40-year term?
Refinancing to a 40-year mortgage is possible but depends on the lender’s policies and your financial situation. Lenders will assess your income, credit history, and equity before approving the refinance. Extending your term may reduce monthly repayments but increase the total interest paid over time. It’s important to weigh these trade-offs and get personalised advice before proceeding.
Are interest rates higher for 40-year mortgages?
Generally, interest rates on 40-year mortgages can be slightly higher than standard 25- or 30-year loans. This is because the lender takes on more risk over a longer period. However, the rate difference varies widely by lender and your credit profile. Comparing offers carefully and negotiating can help secure the best rate available.
How do 40-year mortgages affect building equity?
Because repayments are spread out over a longer time, you build home equity more slowly with a 40-year mortgage. While your monthly payments might be lower, the total interest paid over the life of the loan is usually higher. Building equity faster might require making extra repayments or lump-sum payments when possible. This approach can reduce overall interest costs and shorten your loan term.
Can I make extra repayments on a 40-year mortgage?
Yes, most lenders allow extra repayments on 40-year mortgages, but terms vary. Making additional payments can help reduce the loan principal faster and cut down the total interest paid. Always check with your lender for any fees or restrictions on extra repayments. This flexibility is useful if you want to pay off your loan sooner despite the long term.
Who benefits most from a 40-year mortgage?
40-year mortgages often suit borrowers who prioritise lower monthly repayments to manage their cash flow. This can include young buyers starting out, families with fluctuating incomes, or those facing other financial commitments. However, those who want to build equity quickly or pay off their home sooner might find shorter terms more beneficial. Consulting a mortgage broker can help determine if a 40-year term aligns with your financial goals.
Final Thoughts: Is A 40-Year Mortgage A Good Idea?
Deciding whether a 40-year mortgage is the right choice requires careful consideration of your personal circumstances, financial goals, and long-term plans. While it can be a useful tool for some homebuyers in Australia, it’s not without significant trade-offs.
A 40-year mortgage suits borrowers who need lower monthly repayments to improve affordability. It works well for first-home buyers struggling to meet standard loan terms, younger borrowers with long working lives ahead, and investors focused on managing cash flow rather than fast equity growth. This longer term can provide breathing room in today’s tough economic climate and help more people enter the property market.
However, a 40-year mortgage may not be suitable for everyone. If you want to minimise total interest paid, build equity faster, or achieve financial freedom sooner, a shorter loan term is usually better. It also may not make sense if you’re nearing retirement and want to avoid carrying debt into later years.
Those with stable finances who can comfortably afford traditional 25- or 30-year loans often benefit more from sticking to these shorter terms. They pay less interest overall and reach home ownership sooner.
In summary, a 40-year mortgage is best for those prioritising affordability and cash flow today, while shorter loans suit borrowers focused on long-term savings and quicker equity growth. Knowing where you stand financially will help you choose the right path.
Next Steps And Getting Your Home Loan Approved
Are you ready to get a home loan but unsure which term to choose? Our team at Hunter Galloway is here to help you buy a home in Australia. Unlike other mortgage brokers who are one-person operations, we have an entire team of experts dedicated to helping make your home loan journey as simple as possible.
If you want to get started, please give us a call on 1300 088 065 or book a free assessment online to see how we can help.
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