Get App
Great Southern Bank introduces new 40-year home loan
18 Sept 2025
Great Southern Bank has introduced a new 40-year home loan, providing first-home buyers with an alternative path to enter the property market.
The bank joins a relatively small list of lenders offering mortgages that extend beyond the 30-year mark, which includes Australian Mutual Bank, G&C Mutual, RACQ, Credit Union SA and Pepper Money.
The longer loan term is designed to make homeownership more accessible by significantly reducing a borrower’s minimum monthly repayments, increasing the chance a borrower is approved for a loan and / or helping first home buyers borrow more money from the bank. However, the fact there are so few lenders in the market willing to lend to borrowers beyond the standard 30 years should be a red flag for Australians looking for a way to jump on to the property ladder.
The trade-off: lower repayments but at what cost?
While the new loan offers a potential lifeline to buyers, this short-term gain can potentially come with a substantial long-term cost if the borrower doesn’t make extra repayments.
Canstar research shows on a $600,000 new mortgage, taking on a 40-year loan term, rather than a 30-year one would mean the borrower’s initial monthly repayments are around $312 lower, however, if they then take the full 40 years to pay off the loan then they could potentially pay more than $200,000 extra in interest charges to their bank. Yes, over $200,000 that’s more than an extra third of the initial loan size.
← Mobile/tablet users, scroll sideways to view full table →
| Potential difference between a 30-year and 40-year mortgage: $600k | ||
|---|---|---|
| Loan term | Initial monthly repayments | Interest – life of loan |
| 30-year | $3,407 | $560,618 |
| 40-year | $3,095 | $789,826 |
| Difference | -$312 | $229,208 |
Source: Canstar.com.au. Notes: calculations are estimates based on an owner-occupier paying principal & interest with a starting rate of 5.50%, however, rates vary between lenders. Assumes rates change in line with NAB’s current cash rate forecast. Does not include extra repayments.
A stepping stone, not a life sentence
Great Southern Bank’s Chief Customer Officer, Rolf Stromsoe, views the 40-year mortgage as a “starter home loan” and a stepping stone for first-time buyers.
“For some Australians having lower monthly repayments is the difference between renting and buying their first home.”
“As their needs evolve and their earnings capacity changes, they may refinance any number of times–but this is the loan that can start it all.”
The bank anticipates that the majority of customers will pay off their loans early.
Why the big banks are staying away
While a 40-year mortgage does effectively translate into more interest from the bank, it does pose a greater risk for the bank which is one key reason why the big four banks aren’t offering these types of loans.
Because borrowers pay off the principal amount much more slowly in the early years of the loan, it takes a long time to build up equity in the property. This slower equity build-up, combined with a potential market downturn, could leave borrowers in a state of negative equity, where the outstanding loan balance is greater than the property’s value.
Unsurprisingly, some of the lenders that offer 40-year loan terms require borrowers to be first home buyers or under a certain age, in a move to target customers who have longer in the workforce to pay it off.
What are the alternatives?
While a first home buyer might be tempted to overstretch the budget and commit to a 40-year debt in order to get that first foot on the property ladder, they should stop and consider alternative ways to boost their borrowing capacity.
Buyers can also take proactive steps to boost their borrowing capacity without a longer term. These include:
- Looking for a low-rate mortgage. The banks stress test your finances based on the variable rate you are applying for, plus an additional 3 percentage points. The lower your starting rate, the more you might potentially be able to borrow.
- Cleaning up expenses to show the bank just how frugal they can be.
- Cancelling any credit cards, which can put a significant dent in a person’s borrowing capacity, or switching to one with a lower credit limit.
- Asking their boss for a pay rise (an awkward but important conversation)
The launch of this new loan comes ahead of a boost to first-home buyer assistance from the federal government’s First Home Guarantee scheme, which, from 1 October will lift the caps on the number of places and 10 much people need to earn to be eligible for the scheme.
What are the pros and cons of a longer mortgage?
Borrowers can be attracted to longer mortgages because it has the capacity to significantly reduce their monthly repayments. However, this is because these repayments are spread out over an extra ten years, which means they’ll be paying their bank interest on the money they owe for a lot longer, which ultimately ends up being a win for the lender, not the borrower.
Pros
- Lower monthly repayments.
- Potentially borrow more.
- Boost chance of getting approved.
Cons
- Limited number of lenders to pick from.
- Potentially stay in debt for up to an extra 10 years.
- Pay more in interest over the life of the loan.
- Difficult to refinance out of, particularly in the first 10 years of your loan (depending on your equity).
This article was reviewed by our Finance Editor Jessica Pridmore before it was updated, as part of our fact-checking process.
- CBA breaks the 5% barrier with a 2-year fixed rate special
- Mortgages in arrears ease as rate cuts provide some relief
- Median house prices could soar by up to $154k by end of 2026 as buyers pile into spring home buying season
- Refinance Home Loan Comparison
- 3 year fixed home loans
- Compare some of the lowest variable home loan rates
