If you are shopping for a mortgage and need the lowest possible monthly payment, a 40 year mortgage could be the answer. A 40 year mortgage is a new mortgage offering designed to provide borrowers with lower repayment options; here is what you need to know before signing up for a 40 year mortgage deal.

A 40 year mortgage offers a lower monthly payment because the loan principle is repaid over a longer period of time. You can expect monthly payments to be as much as ten percent lower with a 40 year term. If you are concerned about rising interest rates these savings could offset mortgage rate increases. The problem with a 40 year term is that you will pay much more in finances charges over the additional ten years.

You may have the option of making interest only or optional payments for part of the loan term. Interest only payments will give you an even lower payment until the lender adds the mortgage principle back into the loan. You should consider the risks involved with making interest only or option payments as these loan options can result in negative amortization. If you find yourself in a situation with negative amortization you will end up owing the bank more at the end of the month than you did at the beginning of the month.

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