Is 40 Year Mortgage a Risky Choice?

Today I've heard of fixed interest rate 40 year mortgage for the first time. The longest period I've known about was 30 years. At first sight, contracting a 40 year mortgage or switching from your current 15 or 30 years one seems to be a good option, because this will lower your monthly payments. Another benefit is that you can buy a more expensive property for the same monthly payment, so if you don't qualify for the larger amount, you have the choice to extend the mortgage to 40 years and get it. Sure, that's fine, if you don't mind paying for such a long period of time.

However, there's a negative side of the 40 year mortgage: slower home equity building. Another alarm signal could be that if you're in your 40s when you contract the mortgage, you may not survive to pay it, thus passing it onto your children. I'm not sure about the US laws, but maybe you could just get a life insurance to cover the mortgage payments after you die. Not very long ago, people were not afraid to take such mortgages, because they were pretty sure that in case they can't afford it anymore, they can sell the house, cover the remaining loan amount and still have some money for various things. With the crisis that made the real estate market collapse and prices go down in high speed, a mortgage contracted several years ago can't be covered by simply selling the house, because it is now worth maybe less than half the price you agreed to pay for it.

Getting a fixed interest rate may not be too advantageous, as adjustable rate mortgages may prove to be better over time. However, choosing flexible rates you involve a certain dose of risk, as they may go up and increase your payments significantly, maybe up to the point where they become impossible to pay.

I'd say that the main reason for choosing a 40 year mortgage is the lower monthly payments, so you can afford it. If you can afford higher payments, then shorter term mortgages are better, as you build your home equity much faster and you pay less money overall.

You don't have to live under the mortgage pressure for 40 years, if you don't want to. You can always consider other options such as interest only loans, mortgages with variable rate or pay option mortgages.

I'm not a financial advisor, so I couldn't possibly appreciate which option is better for a give situation, but I suppose interested persons could pay a personal finance specialist to determine which way to go.

I found this video series which shows the faces of foreclosure by featuring people who were sold 40 year mortgage by telephone, only to find out less than one year later that they've been misled and they can't afford the monthly payments anymore, being at risk of losing their homes.