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Is a 40-year home loan a good idea if it means I can borrow more?
Bayley Clarke · Mortgage broker on the road · Last checked 11 November 2026 · 3 min read
The short answer
If you're in your 20s and a 40-year loan doesn't really concern you, because it's still more than likely going to be paid off before you retire, and it helps your borrowing capacity enough to get you into your first property or your next one, then why not? It can make sense.
The catch is that these 40-year products generally come with a slightly higher interest rate than their 30-year companions. So you're trading a lower repayment now for a higher rate, and more interest over the life of the loan. You've got to weigh up how that fits into your financial world.
The 60 second version, filmed from the driver's seat. The rest of this page is the detail underneath it.
Why a longer term lifts borrowing power
When a bank works out how much you can borrow, it looks at whether you can afford the repayments. Stretch the same loan over 40 years instead of 30 and each repayment is smaller, because you're paying the principal back over a longer period. Smaller repayments mean the bank's calculator says you can afford a bigger loan.
For someone right on the edge, that can be the difference between getting into the market now and waiting another couple of years. I think over time this is going to become more of a norm. To bring repayments down, we're going to see longer loan terms for a lot of people, especially first home buyers.
What you give up
Two things. First, the rate. The lenders that offer 40-year terms generally price them slightly higher than the same loan over 30 years, so part of the repayment saving gets eaten by the higher rate.
Second, the total interest. Paying a loan off over 40 years instead of 30 means ten more years of interest, and in the early years more of each repayment goes to interest and less to the loan itself, so the balance comes down slower. Over the life of the loan that adds up to a lot more interest paid. That doesn't make it a bad idea, it just means it should be a deliberate choice, not a default.
Age matters too. Banks look at whether the loan runs past your likely retirement age, and if it does, they generally want to know how you'd pay it off. In your 20s that's usually fine; start a 40-year loan in your mid 30s or later and it gets harder.
How to use one well
The smart way to use a longer term is as a safety net, not a plan. Take the 40-year term to get the loan approved and keep your minimum repayments low, then pay more than the minimum whenever you can, into an offset or as extra repayments. Every extra dollar brings the finish line forward and cuts the interest.
That way you've got the lower minimum for the months when things are tight, a new baby, a job change, a bad year, and you're still chipping away at the loan like it's a 30-year one the rest of the time.
The honest bit: borrowing more isn't always the win
A 40-year term lets you borrow more. Whether you should is a different question. A bigger loan is a bigger loan, and if it only works on the stretched term, there's less room if rates or your circumstances change.
So look at the repayments on both terms, side by side, and decide with the numbers in front of you. That's part of the work I do: review where things are at and find the structure that actually suits you.
Wondering if a longer term gets you over the line?
A 30 minute call. We compare what you can borrow on 30 and 40 years, the repayments each week, and whether the trade-off makes sense for you.
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Next question
Should I take a 30 year loan term, or one that's shorter?You can take a 20 year term if you can afford it, but it locks your minimum repayment higher.
Related answers
The full guide: Why is my borrowing power so low? The full guide: Loan terms, explained Does refinancing put me back to a 30 year loan term? How much can I actually borrow? Can my first home be something cheaper, like a unit, instead of holding out for my forever home? How do I actually pay off my home loan sooner?Not your question? Book a call and ask it, or call 0437 189 939.