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Graduated Payment Mortgages
What Is a Graduated Payment Mortgage?
A graduated payment mortgage (GPM) is a loan that starts with lower payments that increase gradually over time.
It is designed for borrowers expecting rising income.
Initial payments may not fully cover interest, which can lead to negative amortization.
Why It Matters in a Mortgage
GPMs may:
- Improve short-term affordability
- Increase long-term cost
- Require careful income planning
These loans are less common today but may appear in specialized programs.
How It Works
Payments increase on a predetermined schedule.
Early payments may not fully reduce principal.
GPM vs. Standard Amortization
GPM → Rising payments
Standard → Stable payments
FAQs About Graduated Payment Mortgages
Do payments always increase?
Yes, per schedule.
Can negative amortization occur?
Yes.
Are they common today?
Less common.
Related Terms
