The 40-Year Mortgage Is Back for Investors (2026): What It Fixes, What It Costs, and the Capacity Myth
- AMP Bank launched a 40-year investment loan on 30 July, with up to 10 years interest-only chosen at the start, with no reassessment when the period ends, for investors at 80 per cent LVR or below. It joins a small group of lenders already offering 40-year terms.
- The timing is not an accident: the May budget’s changes to negative gearing and CGT put investor cashflow front of mind, and a longer term plus long interest-only is a cashflow product.
- The honest three-part verdict: it genuinely lowers repayments, it genuinely raises lifetime interest, and, the part the coverage misses, it does not increase how much you can borrow: serviceability on these products is still assessed on a standard 30-year footing. A 40-year term changes how you repay, not what a lender will write.
- The calculator below shows the monthly relief and the lifetime bill side by side, on your numbers.
What just launched, and why now
On 30 July 2026 AMP Bank launched Equity Flex, an investment property loan with terms up to 40 years and an interest-only period of six to ten years selected upfront with no reassessment when it ends, available to investors with a loan-to-value ratio of 80 per cent or below borrowing $100,000 or more. It makes AMP the first bank pairing a 40-year investor term with ten-year interest-only, joining a small group of lenders already writing 40-year terms, and it arrives as the May budget’s negative gearing and CGT changes push investor cashflow to the centre of the conversation.
The product news, briefly: AMP Bank’s Equity Flex, launched 30 July, offers investors terms up to 40 years with six to ten years of interest-only repayments chosen at the start, and, unusually, no reassessment when the interest-only period ends and the loan rolls to principal-and-interest. It is for investors at 80 per cent LVR or below, borrowing $100,000 and up. A handful of lenders already write 40-year terms; the ten-year interest-only run with no mid-life re-approval is the genuinely novel part.
Why now is no mystery. The May budget’s rework of negative gearing and CGT changed the after-tax arithmetic of holding property, investor applications have fallen hard across the market since, and lenders want the investors who remain. A product built entirely around monthly cashflow is a precise answer to the moment, which is exactly why it deserves a precise reading rather than a headline one.
What it fixes: the cashflow arithmetic
Stretching the same loan from 30 to 40 years lowers the principal-and-interest repayment because the principal is spread across 120 additional months, typically reducing the monthly commitment by mid single digits as a percentage; an interest-only period lowers the outgoing further for its duration. For an investor solving a monthly cashflow problem, particularly after the 2026 tax changes reduced the subsidy on holding costs, that relief is real, and a ten-year interest-only run with no reassessment removes the usual five-year re-approval risk on the strategy.
Two levers are at work, and they are different sizes. The term stretch from 30 to 40 years trims the principal-and-interest repayment by spreading the principal over an extra decade: real relief, though smaller than most people guess, because the interest component, the bulk of an early-years repayment, does not shrink with the term. The interest-only period is the bigger lever while it runs: for up to ten years the outgoing is the interest alone, which is the lightest a holding cost gets.
The structural detail that matters most to anyone who has held investment debt before: typical interest-only terms run five years and end in a reassessment, where the lender re-evaluates you before extending, a genuine risk if your circumstances have moved. Setting ten years upfront, with no reassessment, removes that cliff for a decade. For a portfolio built on planned cashflow, certainty is worth nearly as much as the dollars.
What it costs: the lifetime bill
The price of lower repayments is more interest for longer: the same balance at the same rate accrues materially more total interest over 40 years than over 30, because principal is retired more slowly, and any interest-only period adds further since the balance does not fall at all while it runs. Slower principal reduction also means slower equity growth from repayments, leaving capital growth to do more of the work. The trade is rational for an investor deliberately buying cashflow room; it is expensive as a default choice.
Nothing here is free. Retire principal more slowly and you rent the bank’s money for longer: the same loan at the same rate costs materially more total interest over 40 years than over 30, and every interest-only year adds to the bill because the balance stands still while it runs. Equity builds more slowly too: on a long interest-only run, repayments contribute nothing to it, so your equity growth is whatever the market grants and nothing more. The calculator below puts both sides of the trade in dollars, on your numbers, and the monthly relief usually looks smaller, and the lifetime cost larger, than the marketing framing suggests.
The capacity myth: 40 years does not mean borrowing more
A longer loan term does not increase borrowing capacity: serviceability on these products is assessed on a standard 30-year principal-and-interest footing, so the maximum a lender will write is unchanged by choosing a 40-year term. The longer term changes the repayment schedule after approval, not the assessment before it. Anyone adopting a 40-year product expecting to qualify for a larger loan has misread what the product does; it is a cashflow instrument, not a capacity instrument.
Here is the part the excited coverage reliably gets wrong, and the reason we wanted to write this piece. The intuitive read of a 40-year term is “smaller repayments, therefore I can service a bigger loan, therefore I can borrow more.” That is not how these products are assessed. Serviceability is still run on a standard 30-year principal-and-interest basis: the lender sizes the loan as if you were repaying it over 30 years, and the 40-year schedule only changes what happens after approval. Your maximum loan is the same number it was before the product existed.
Read properly, that is not a flaw, it is the design. The product does one thing: it buys monthly cashflow room on a loan you already qualify for. If the problem you are solving is capacity, the real levers live elsewhere: income treatment, existing-debt structure, and lender selection, the territory of our investment property guide. If the problem is monthly holding cost in the post-budget tax landscape, this is the aisle to shop in, with eyes open to the lifetime bill.
Calculator: 30 versus 40 years on your loan
Enter a loan amount and an interest rate to compare the same loan over 30 and 40 years: the monthly principal-and-interest repayment on each, the monthly difference, and the total interest paid over each life, computed on standard amortisation with the rate held constant. Numbers are entered by you and processed in your browser: nothing is stored, sent anywhere, or seen by anyone.
The whole trade in two numbers: what you save each month, and what the extra decade costs in total. Your loan, your rate:
Assumes principal-and-interest repayments from day one and a constant rate for illustration; an interest-only period would lower early repayments and raise lifetime interest further. Excludes fees. Your numbers are not stored, not sent anywhere, and not seen by us. General information only, not credit advice.
Who it actually suits
Long-term and long interest-only structures suit investors deliberately buying cashflow certainty: portfolio holders managing post-budget holding costs, buyers of strong-yield assets where the gap to cover is small, and investors pairing the structure with offsets and a planned exit or refinance before the long tail of the term does its damage. They suit badly as a default for owner-occupiers or for anyone stretching to afford repayments only the 40-year schedule makes possible, where the structure converts a serviceability warning into a lifetime interest bill.
Cases where the structure earns its keep: the portfolio investor whose post-budget tax position turned a modest monthly shortfall into a larger one, and who wants certainty the strategy survives a decade; the yield-focused buyer in the markets our rental yields piece maps, where rent covers most of the interest and the structure closes the gap; the investor running disciplined offsets, where surplus cash quietly does the principal’s job with full flexibility. In each, the long term is a chosen instrument inside a plan with an exit: sell, refinance, or step to principal-and-interest once incomes or rents catch up.
Where it suits badly: as a way to make repayments feel affordable on a loan that is at the edge of serviceability, or as a set-and-forget structure that quietly runs its full 40 years because nobody revisited it. The product rewards management and punishes neglect, which is, honestly, true of investment debt generally, just with a longer lever.
Frequently asked questions
Can you get a 40-year mortgage in Australia?
Yes: a small group of lenders write 40-year terms, and in July 2026 AMP Bank became the first bank to pair a 40-year investor term with up to ten years of interest-only repayments set upfront. Availability is concentrated in investment lending, with eligibility rules including an 80 per cent maximum LVR on the newest product.
Does a 40-year loan term let me borrow more?
No. Serviceability on these products is assessed on a standard 30-year principal-and-interest footing, so the maximum loan is unchanged by the longer term. The 40-year schedule lowers the repayment after approval; it does not change the assessment before it.
How much lower are repayments over 40 years than 30?
Typically a mid-single-digit percentage reduction in the monthly principal-and-interest repayment, because the interest component, which dominates early repayments, does not shrink with the term. The calculator above gives the exact figure for your loan and rate, alongside the lifetime interest cost of taking it.
Why would an investor want ten years of interest-only?
Cashflow and certainty: interest-only is the lightest a holding cost gets, and a ten-year period fixed upfront with no reassessment removes the usual five-year re-approval risk. After the May 2026 budget reduced the tax subsidy on holding costs, predictable outgoings became the binding constraint for many portfolio investors.
Is a 40-year mortgage a bad idea?
It is a trade, not a trap: genuinely lower monthly outgoings in exchange for materially more lifetime interest and slower equity growth. It is rational for investors deliberately buying cashflow room inside a managed plan with an exit, and expensive as a default choice or as a way to stretch affordability.
Can owner-occupiers get 40-year terms?
The new product is investor-only, and 40-year availability generally concentrates in investment lending, though some lenders have offered longer terms to younger owner-occupier borrowers and policies vary. For owner-occupiers the more common cashflow levers are offsets, repricing and lender selection.
What happens when the interest-only period ends?
The loan rolls to principal-and-interest for the remaining term and the repayment steps up, since the same principal now amortises over fewer years. The notable feature of the newest product is that this roll happens without reassessment when the period was set upfront; on many older structures, extending interest-only meant a fresh approval.
How do the May 2026 tax changes connect to this?
The budget’s negative gearing and CGT changes reduced the tax subsidy on investment holding costs, so more of any monthly shortfall is borne by the investor. Products that lower and stabilise the monthly outgoing are the lending market’s response, and our negative gearing and deductions guides cover the tax side of the same equation.
The honest summary
A 40-year investor loan with a decade of interest-only is neither the affordability breakthrough the headlines imply nor the trap the sceptics imply. It is a precise instrument: it lowers the monthly cost of holding an asset, charges you materially more over the loan’s life for the privilege, and changes nothing about how much you can borrow, because the assessment still runs on 30-year maths. If your constraint is monthly cashflow in the post-budget landscape, it belongs on your shortlist, structured with offsets and an exit. If your constraint is capacity, it is the wrong aisle entirely, and the right ones are income treatment and lender selection. Knowing which constraint is actually yours is the whole game, and it is exactly what we help you work out.
Cashflow problem or capacity problem? Bring the loan, we will tell you which.
A former banker maps your position across more than 40 lenders: whether a long term or interest-only structure genuinely serves your plan, what it costs over the life, and where the capacity levers actually are. Free, and the honest answer is sometimes that your current structure is right.
Book a chat with a former bankerAbout the author. Ahmed Lotfi is co-founder of Everstone Finance and a former banker who now works as a mortgage and finance broker in South Yarra, Melbourne, arranging home, investment and commercial lending for clients across Australia and abroad. Everstone Finance operates under the Best Interests Duty as Credit Representative 574314 of LMG Broker Services Pty Ltd, Australian Credit Licence 517921.