For decades, a 30-year mortgage has been the standard in Australia. But that’s beginning to change.

AMP has introduced a 40-year loan for investment properties, sparking debate about whether longer loan terms could become part of the solution to Australia’s housing affordability challenges.

For some Australians, a 40-year loan could make property ownership or investing more accessible by reducing monthly repayments. But while the short-term benefits are appealing, there are important long-term trade-offs to consider.

What is a 40-year loan?

A 40-year loan is exactly what it sounds like: a mortgage that is repaid over 40 years instead of the traditional 30.

AMP recently introduced Equity Flex, an investment property loan offering:

• Loan terms of up to 40 years
• Up to 10 years interest-only with no reassessment
• Greater flexibility for investors managing cash flow

According to AMP, the product responds to changing market conditions following the Federal Budget’s changes to negative gearing and capital gains tax, alongside ongoing cost of living pressures.

Rather than changing how much you borrow, a 40-year loan changes how long you have to repay it.

Who benefits from a 40-year loan?

A 40-year loan isn’t designed for everyone, but it could benefit:

• Younger Australians entering the property market
• Property investors looking to improve cash flow

One of the biggest advantages is lower monthly repayments.

For example, on a $1 million loan, extending the loan term from 30 years to 40 years reduces repayments from approximately $6,321 per month to $5,855 per month.

The benefits of a 40-year mortgage

Lower monthly repayments are only one advantage.

A longer loan term may also provide:

• Improved monthly cash flow
• Greater flexibility for investors
• The opportunity to buy sooner rather than later

For property investors, improved cash flow can make it easier to hold an investment while focusing on longer-term wealth creation.

However, it’s important to remember that lower repayments don’t mean the loan costs less.

The trade-offs borrowers need to understand

The biggest downside of a longer loan is the amount of interest paid over time.

By extending repayments over another decade, borrowers could pay significantly more across the life of the loan.

Some estimates suggest:

• Approximately $535,000 more on a $1 million loan.

Other considerations include:

• Slower equity growth
• Greater exposure to future interest rate changes
• More challenging refinancing or exit strategies

These factors mean a 40-year loan should be viewed as a strategic tool rather than simply a way to reduce repayments.

Why has AMP introduced a 40-year loan?

According to AMP, the new Equity Flex product was developed to help investment property buyers better manage cash flow following the Federal Budget’s changes to negative gearing and capital gains tax, alongside ongoing cost of living pressures.

As a challenger bank, AMP is often able to introduce new lending products more quickly than the major banks, which typically have longer approval and risk assessment processes.

Whether Australia’s big four banks eventually introduce similar products remains to be seen.

Is borrowing for longer really the solution?

The bigger conversation isn’t whether Australians should borrow for 40 years.

It’s whether the traditional path to home ownership still reflects today’s reality.

For many Australians, the idea of saving for years before buying a home in their ideal suburb has become increasingly difficult.

That’s why alternative strategies such as rentvesting, building equity through investment properties and using the bank of Mum & Dad have become more common.

A 40-year loan may provide the flexibility needed to make those strategies work, but it isn’t a solution on its own.

Like any financial product, it should form part of a broader plan rather than being the entire strategy.

Final thoughts

A 40-year loan offers lower monthly repayments, improved cash flow and greater flexibility, which may help some Australians enter the property market sooner.

However, those benefits come with significant long-term costs, including paying substantially more interest and building equity more slowly.

For the right borrower, it could be a useful tool. But the real question isn’t whether a 40-year loan is good or bad, it’s whether it supports a long-term property strategy that aligns with your financial goals.

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Frequently Asked Questions

Why has AMP rolled out a 40-year home loan?

• AMP introduced its Equity Flex investment loan to provide investors with greater cash flow flexibility following recent Federal Budget changes to negative gearing and capital gains tax, as well as ongoing cost of living pressures. The product offers loan terms of up to 40 years and up to 10 years interest-only without reassessment.

What does a 40-year mortgage mean for the average Australian?

• A 40-year mortgage spreads repayments over an additional decade, reducing monthly repayments compared to a standard 30-year loan. This can improve cash flow and potentially help some Australians enter the property market sooner. However, borrowers will generally pay more interest over the life of the loan

What are the risks of adding an extra 10 years to your home loan?

• The main risks include:
  • Higher lifetime interest costs
  • Slower equity growth
  • Longer exposure to interest rate changes
  • More difficult refinancing or exit strategies

• While repayments are lower each month, the overall cost of the loan is typically much higher.

Why haven’t the big four banks introduced 40-year loans?

• The major banks generally have larger governance, compliance and risk approval processes before launching new lending products. As a challenger bank, AMP has been able to respond more quickly to changing investor needs and bring a new product to market sooner.

Should more lenders offer 40-year home loans?

• Greater product innovation gives borrowers more options, and having additional lending solutions is generally positive. However, a 40-year loan won’t suit everyone. It should be considered as one tool within a broader financial strategy rather than a standalone solution to housing affordability.