A non-bank lender has launched a 40-year home loan for investors and owner occupiers, with up to 95% LVR including risk fees. The pitch is simple: longer terms mean lower repayments, which means more properties come within reach.
That is true as far as it goes. The catch is what the extra decade does to the total bill and to the speed at which a borrower owns their home.
What a 40-year home loan actually changes
Stretching a loan from 30 to 40 years lowers the monthly repayment, but by less than most people assume. The first 30 years of a loan are mostly interest. Adding 10 more years spreads the principal thinner, yet the interest bill keeps compounding on a balance that falls slowly.
As a rough illustration only, take a $700,000 loan at 6%. A 30-year term has repayments of about $4,200 a month. A 40-year term brings that down to roughly $3,850. That is around $350 a month saved. Over the full term, total interest rises from roughly $810,000 to about $1.15 million. These figures are indicative and will shift with the actual rate, fees and any offset balance.
So the monthly relief is modest, while the lifetime cost climbs by something like $340,000 in this example.
Slower equity, longer exposure
The other cost is harder to see in a repayment calculator. With a longer term, less of each early repayment reduces principal. After five years on a 40-year loan, the balance is noticeably higher than on a 30-year loan of the same size.
That matters if prices soften. A borrower with a thin deposit and a slowly shrinking balance has less cushion if they need to sell, refinance or switch lenders. The product’s high LVR ceiling adds to that exposure.
The lender itself acknowledges the trade-off, noting higher lifetime interest and slower early equity build. It expects brokers to walk clients through it.
Where serviceability gets stretched
The more significant feature may be how the loan is assessed. This product tests serviceability over a maximum of 35 years rather than 30. A longer assessment period lowers the repayment used in the test, which lifts the amount a borrower can qualify for on the same income.
That is the real lever. Longer terms do not just reduce repayments. They can raise borrowing capacity at the margin.
If enough buyers use that extra capacity, it can flow into bidding. Sellers do not discount for a buyer’s loan term. They respond to who can pay the most. Where supply is tight, extra borrowing power can end up capitalised into prices rather than leaving buyers better off.
Who it might suit
The lender points to first home buyers and younger owner occupiers, upgraders, and refinancers wanting lower repayments. There are sensible uses here:
- A younger borrower who expects income to rise and plans to make extra repayments.
- A household using an offset account to cut interest, treating the long term as flexibility rather than a target.
- An investor prioritising cashflow, with a clear exit strategy.
The features support that approach. The loan includes a 100% offset facility, unlimited extra repayments and redraw. A borrower who takes the 40-year term but pays as if it were 30 gets the flexibility without most of the extra interest.
The risk is the borrower who pays only the minimum for decades.
Interest-only and age limits add layers
The product offers up to 10 years interest only for investors and up to five for owner occupiers. Interest-only periods push principal reduction even further out. Combined with a long term, the loan balance can barely move for years.
Age also shapes who benefits. Full 40-year terms are available up to age 45, with terms shortening for older borrowers up to 50. A borrower in their late 40s gets a shorter term and fewer of the repayment benefits.
For context on what buyers are actually prioritising when they shop, see our look at what today’s homebuyers want. Loan length rarely tops that list, but it shapes what they can afford to chase.
Key numbers
- 40 years: maximum loan term on offer
- 35 years: serviceability assessment period, versus 30 for many loans
- Up to 95% LVR including risk fees
- Up to 10 years interest only for investors, five for owner occupiers
- Illustrative extra interest on a $700,000 loan at 6%: around $340,000
The bottom line
A 40-year home loan is a tool, not a bargain. It lowers repayments a little, lifts borrowing capacity through a longer serviceability test, and costs a lot more in interest if used passively. Whether it helps a household or simply adds to price pressure depends on how it is used and how many buyers lean on it.
If you are weighing a longer term, ask your broker to model total interest and equity at five and ten years on both a 30- and 40-year structure, using your actual rate and offset plans.
General info, not financial advice. Subscribe to the newsletter for weekly property and finance analysis.
