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Date Published : Friday, January 18, 2008
It may seem like an extraordinarily long time to be tied to a lender, but it could be the case that 40-year mortgages might provide families with that bit of breathing space when buying a home.
Taking out a mortgage over such a long time could be seen as something of a risk, particularly should interest rates fall. Borrowers could find themselves paying back their mortgage at a higher rate than the Reserve Bank has set.
On the other hand, it is the long-term security of such loans that appeals to many housebuyers. At times when interest rates are rising, it might be some reassurance to some that they are not in danger of seeing their repayments soar after a three to five-year period.
Take, for example, the case of one 40-year-old mother of three, who has recently signed up to a 40-year fixed-rate agreement with her lender.
For Kelly Cruz, the length of the repayment period does not dictate how long it will take her to pay the loan back - but it does provide her with some certainty at a time when that commodity is in short supply in the financial arena.
"[The 40-year mortgage] is good for us now because it tides us over while I'm on half salary for six months because of the baby, -and then when I go back to work part-time until all the kids are at school. This is a breather," she told the Australian.
"We'll change it when the kids are all at school and I can go back to work full time. We've just sold our house and bought another one - and we can afford it because we can spread the loan over 40 years.''
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