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Pros and Cons  

The additional 10 year extension is successful at its mission of making a borrower’s mortgage payments more manageable. With the 40-year loan option increasing the full term of the loan from 360 months to 480 months, their monthly principle will be significantly decreased. 

However, many are criticizing this loan extension option on the basis of the maturation of the loan. With the average age of a first-time home buyer in the United States being 33, the 40-year loan option would then be completed when the average-aged borrower is 73 (the national average for retirement age is 64). Another downside is the remarkable increase in the interest paid. No borrower is happy about paying interest, and this 10 year increase in the loan term opposes their effort to minimize interest paid. 

Looking at the overall picture, the 40-year loan option still has a specific purpose: To help reduce the burden of mortgage payments for those financially recovering from the economic impact of the past few years – and it fulfills that purpose. Though not for everyone, the HUD’s press release specifically described, “This new loss mitigation home retention option is designed to help those borrowers who cannot achieve a minimum targeted 25 percent reduction in the Principal and Interest portion of their mortgage payment through FHA’s existing 30-year mortgage modification with a partial claim.”