Graduated-Payment Mortgage (GPM) - A graduated-payment mortgage is designed with lower payments in the early years of a loan. These payments increase gradually until they are sufficient to amortize the loan fully. Thus, borrowers are able to obtain home loans with affordable payments while banks earn the desired interest rate over the loan term.Always ask your mortgage broker if this is an option with the home loan that you are looking to obtain.
The GPM is another alternative to the conventional adjustable rate mortgage, and is making a comeback as borrowers and mortgage companies seek alternatives to assist in qualify for home financing
Graduated Payment Mortgage - A graduated payment mortgage is conventional loan that contains a fixed rate for the life of the loan, but graduates (or increases) the payment during a certain period.
Example:
A 6.5% payment increase for the first five years of the loan, and then the payment becomes fixed at that level for the remainder of the loan.
The lower qualifying rate of the GPM can help borrowers maximize their purchasing power, and can be useful in a market with rapid appreciation. In markets where appreciation is moderate, and a borrower needs to move during the scheduled negative amortization period they could create an unpleasant situation.
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is subject to change without notice.