The recent decline in interest rates conditioned many borrowers to expect lower payments.

People were able to increase the size of their mortgages by cashing out equity from their properties, but because of lower rates their payments would not rise as much, or sometimes actually went down.

Now that interest rates have slowly started to inch up, lenders have rolled out a new loan type.

Lenders are now offering 40 year loan terms. A 40 year loan term stretches payments out over 40 years. Even with interest rates rising, using a 40 year term lessens the impact.

It is important to know that these 40 year terms define the loan length, not the loan type. These types of loan terms are offered for different loans, such as:

A 40 year term that is fixed for the first 30 years
A 40 year term for minimum payment loans
A 40 year term that is fixed for few years, such as 10 years

The loan term does not affect the size of an interest-only payment. An interest-only payment is the same size, regardless of the number of years the loan amortizes.

A 40 year loan term is an option on many different types of loans. If getting a lower payment is a priority, you can explore this option with your lender or broker. Keep in mind that the 40 year loan term option has been added to many different loan types, so you still have a wide choice of loans.