With rising property prices and stretched affordability, some Australian lenders are now offering 40-year home loans as a way to reduce monthly repayments. But while the idea of smaller instalments sounds appealing, it can also mean paying thousands more in interest over time — and potentially carrying debt into retirement. Let’s break down what a 40-year mortgage really means, who it suits, and how to make it work for you.
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
Australia’s housing market and financial pressures are pushing more buyers to explore 40-year house loans. Here’s why this trend is growing.
1. High Cost of Living and Rising Interest Rates
Australians face growing financial pressure:
- Everyday expenses—from groceries to fuel—keep rising. This makes monthly mortgage repayments feel heavier, especially for first-home buyers.
- Wage growth is struggling to keep pace with inflation. Longer loan terms offer a way to reduce immediate financial strain.
- Recent Reserve Bank interest rate hikes have made standard mortgage repayments harder to manage. A 40-year loan spreads costs out, making them more manageable each month.
2. Housing Affordability Crisis
Property prices remain out of reach for many first-home buyers:
- In Sydney, the median house price is 14.7 times the median NSW wage, surpassing global affordability benchmarks. High prices force buyers to seek longer terms to lower repayments.
- Key workers, such as teachers and aged-care staff, struggle to save for a deposit without severe financial strain. A longer term allows them to enter the market sooner.
- The average first-home buyer in 2025 is around 37 years old, meaning a 40-year mortgage could extend repayments into their late 70s. Despite this, many see it as the only way to afford a home now.
3. Lower Monthly Repayments Make Long-Term Loans Attractive
Longer terms reduce short-term financial stress:
- Extending a $600,000 home loan from 30 to 40 years can reduce monthly repayments by over $300. Smaller payments each month make budgeting easier for families and young buyers.
- This makes home ownership more accessible for those with tight budgets or fluctuating incomes. Lower repayments can also help cover other living costs while still owning a home.
4. Growing Interest in 40-Year Home Loans
Recent data shows Australians are seriously considering longer loans:
- A Finder survey found that 30% of Australians (roughly 6.2 million people) would consider a 40-year mortgage to improve affordability. This shows a growing acceptance of extended loan terms in the market.
- Many borrowers view it as a way to buy sooner and manage monthly repayments, despite the higher long-term cost. For first-home buyers, the idea of getting into a home sooner outweighs the potential long-term expense.
5. Weighing Affordability vs Long-Term Cost
While lower repayments make 40-year loans attractive, they come with trade-offs:
- Total interest over the life of the loan rises substantially. Yet many buyers are willing to pay more overall for the chance to own a home sooner.
- Equity builds more slowly, meaning borrowers take longer to own a meaningful portion of their home. Still, entering the market now feels more achievable than waiting years to save a bigger deposit.
- Repayments can stretch into retirement, increasing financial vulnerability later in life. Despite this, long-term loans offer a practical solution for buyers priced out of the current market.
6. Regulatory Insight
- The Australian Prudential Regulation Authority (APRA) cautions that long-term mortgages may increase borrower vulnerability due to extended exposure to interest rate rises.
- This makes careful planning and understanding of repayment strategies, interest risk, and equity growth even more important before committing to a 40-year loan.
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.
How The 40-Year Term Changes Your Mortgage (With Real Numbers)
Ever wondered how much difference an extra 10 years makes on your home loan?
Let’s break it down with real maths — no fluff, just numbers you can understand.
The simple maths behind your mortgage
Home loans are based on compound interest. Each month, you pay back a mix of interest (what you owe the bank) and principal (what you actually borrowed).
When you stretch your loan from 30 years to 40 years, two things happen:
- Your monthly repayments drop because you’re spreading the debt over a longer time.
- But you’ll pay much more interest overall — sometimes hundreds of thousands more.
Real example: $800,000 loan at 6% interest
Let’s use an easy example most Australians can relate to.
Loan Term | Monthly Repayments | Total Interest Paid | Total Cost of Loan |
30 years | $4,796 per month | $926,706 | $1,726,706 |
40 years | $4,402 per month | $1,312,820 | $2,112,820 |
That’s about $395 less per month — but it costs you an extra $386,000 in interest over the life of the loan.
So, while the 40-year term looks more affordable short-term, it’s far more expensive long-term.
Why the interest keeps piling up
Here’s what’s happening behind the scenes:
- Every month, the bank charges interest on whatever balance is left.
- In the early years, most of your payment goes toward interest, not your loan balance.
- With a 40-year mortgage, you stay in that “interest-heavy” phase for much longer.
- So, even though you’re paying less each month, you’re barely chipping away at the principal.
It’s like jogging on a treadmill — you’re moving, but not getting much closer to the finish line.
How Slowly Equity Builds On A 40-Year Loan
Let’s take a closer look at how much equity you actually build over time.
We’ll use the same example — an $800,000 home loan at 6% interest.
Loan Term | Monthly Repayment | Loan Balance After 5 Years | Loan Balance After 10 Years | Loan Balance After 20 Years |
30 years | $4,796 | $744,000 | $676,000 | $422,000 |
40 years | $4,402 | $772,000 | $736,000 | $562,000 |
(Assumes no extra repayments and constant 6% interest rate.)
What the numbers mean
Time Period | 30-Year Loan | 40-Year Loan | Difference (Equity Gap) |
After 5 years | $56,000 equity built | $28,000 equity built | $28,000 less equity |
After 10 years | $124,000 equity built | $64,000 equity built | $60,000 less equity |
After 20 years | $378,000 equity built (loan balance $422,000) | $238,000 equity built (loan balance $562,000) | $140,000 less equity |
That’s a $140,000 difference in ownership even after two decades.
Why it happens
Here’s the simple truth:
A 40-year term spreads your repayments across 480 months instead of 360.
That smaller monthly amount means you’re paying interest for longer, and it takes much longer to chip away at the loan principal.
In the early years, nearly all your repayment goes toward interest, not the loan balance.
So, while the 40-year loan gives you breathing room each month, your equity grows at a snail’s pace.
Why slow equity growth matters
- Harder to refinance: Low equity can limit access to better rates later.
- Less flexibility: You’ll have less to leverage for renovations or investments.
- Higher long-term cost: You’ll stay in mortgage debt longer and pay far more in total interest.
If property prices rise fast, this delay might not hurt. But if prices stagnate, you could find yourself stuck with a high balance and little real ownership for years.
Best 40‑Year Mortgage Options In Australia
…and what they offer for first‑home buyers and long‑term borrowers.
Leading Lenders Offering 40‑Year Loans
Pepper Money
- Scope: One of Australia’s first widely available 40‑year mortgage providers (late 2024). Pepper Money stepped into the gap left by traditional lenders and targets buyers needing flexible repayment structures.
- Key features: 100% offset account, unlimited extra repayments, no break fees. Their flexible structure suits self‑employed and non‑standard borrowers.
Great Southern Bank
- Scope: Great Southern Bank has recently launched a 40‑year home loan product aimed at younger buyers and first‑home buyers.
- Product specifics: Designed as a stepping stone for first‑home buyers to enter the market by reducing monthly repayments. The term up to 40 years is now available under certain eligibility criteria.
- Key features: Helps buyers who might otherwise struggle to meet traditional 30‑year serviceability tests. Allows for extended term to improve affordability while planning for future refinancing.
Credit Union SA
- Scope: Offers the “XL Home Loan” with a 31–40‑year term for owner‑occupiers in South Australia, including first‑home buyers and those building new homes.
- Key features: Construction loans, offset accounts, extra repayments allowed. A strong choice for buyers planning to live long‑term in South Australia.
Other Smaller Lenders
- Scope: Lenders such as G&C Mutual Bank, Australian Mutual Bank and RACQ Bank offer more flexible lending criteria, including 40‑year terms in some cases.
- Key features: More personalised approval processes, regional focus, flexible repayment features like redraw and offset.
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
Who offers 40-year home loans in Australia?
Only a few lenders in Australia currently offer 40-year mortgages. Some customer-owned banks and credit unions, such as Great Southern Bank, have introduced them. Availability depends on the lender’s credit policy, your age, and income stability.
Can you get a 40-year mortgage in Australia?
Yes, but they’re not common. Some lenders, including select major banks, offer 40-year terms for specific situations like loan portability or first-home buyers. Check with a mortgage broker to find lenders currently providing this option.
What is the longest mortgage term in Australia?
The standard mortgage term in Australia is 30 years, but some lenders now offer up to 40 years. Longer terms lower monthly repayments but significantly increase total interest paid over the life of the loan.
How old do you have to be to get a 40-year mortgage?
Most lenders require that the loan be fully repaid before retirement age, typically around 70 to 75 years old. This means borrowers usually need to be under 35 to qualify for a full 40-year term.
Does HSBC offer 40-year mortgages in Australia?
No, HSBC Australia does not currently provide 40-year mortgage terms. Their maximum loan term is generally 30 years. However, loan products change, so check directly with HSBC or a broker for the latest offerings.
Can I refinance my existing home loan to a 40-year term?
Yes, refinancing to a 40-year term is possible if your lender allows it and you meet eligibility criteria. Extending your loan term can reduce monthly repayments but increases total interest, so consider the trade-offs carefully.
Are interest rates higher for 40-year mortgages?
Typically, yes. Lenders may charge slightly higher interest rates for 40-year mortgages because of the longer risk exposure. Comparing rates from multiple lenders and negotiating terms can help you secure a better deal.
Can I fix the interest rate for the full 40 years?
No, fixed-rate periods in Australia rarely extend beyond five years. Even if your loan term is 40 years, you’ll likely switch to a variable rate or renegotiate a new fixed term after the initial period ends.
How do I calculate the extra interest on a 40-year loan?
Use a home loan calculator to compare total interest over 30 and 40 years. For example, a $600,000 loan at 6% interest costs around $696,000 in interest over 30 years versus $984,000 over 40 years — an extra $288,000.
How can I pay off a 40-year mortgage faster?
You can shorten your repayment time by making extra repayments, using an offset account, or refinancing to a shorter term later. Even small additional payments can save thousands in interest over the life of the loan.
How do 40-year mortgages affect building equity?
Because payments are stretched over a longer time, equity builds more slowly. To grow equity faster, make lump-sum repayments, direct bonuses into your loan, or increase your monthly payments when possible.
Who benefits most from a 40-year mortgage?
A 40-year mortgage suits borrowers wanting smaller monthly repayments — such as first-home buyers, young families, or those with variable income. However, it’s less ideal for people focused on paying off their home quickly or retiring debt-free.
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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