Take a 40 year loan and treat it like a 30

If a prospective homebuyer takes out a 40-year mortgage, he may be able to afford the house of his dreams. But then he balks at the term of the loan, preferring a tried-and-true 30-year FRM. No problem, says Dr.

Don with Bankrate.com. Simply suggest he take out a 40-year FRM and pay it off as if it's a 30-year, adding principal to each monthly mortgage payment, or saving money and paying the equivalent amount once per year. Bankrate.com has a calculator (www.bankrate.com) that can determine monthly payments broken down by principal and interest.

For example, a $200,000, 40-year loan at 7 percent comes out to $1,242.86 per month. That same loan and interest paid off over 30 years comes to $1,330.60. One caveat to this free 40-year to 30-year conversion system, however: When taking out the initial 40-year mortgage, make sure it doesn't contain prepayment penalties. Also, check the math periodically to make sure the lender is actually applying the extra principal payments to the principal.
Source: Bankrate.com