As you’ve probably heard, many lenders have been hit hard by the ongoing subprime mortgage lending crisis. Countrywide Financial, is one example that has seen its stock go down about 75% in the last year alone. And if you couple that with a recently downgraded credit rating, it makes you wonder how they are keeping bankruptcy at bay. The word on the street is that they are doing this by infusing capital from other more successful divisions into the mortgage lending division.

Another way that Countrywide, Freddie Mac, Wells Fargo, Washington Mutual, Fannie Mae and Bank of America are attempting to fix this issue by offering a new, 40 year mortgage product. While this deal may look great to someone who is on the verge of losing their home, (especially if it provides a way to get out of an adjustable-rate mortgage (ARM) that is about to enter into a higher fixed interest rate) in reality the whole concept needs to be examined very closely by new home buyers or current home owners before deciding to go with a 40 year mortgage option.

Here are some things to consider:

The actual savings could be minimal in the long run if the interest rate on your 40 year mortgage is higher than a 30-year fixed mortgage.

Calculate the extra interest you’ll wind up paying over the additional ten years – is it really worth it?

If you plan on selling in a few years, you’ll be building equity more slowly so the profit margin will be slimmer.