DEFINITION of 'Graduated Payment Mortgage'

A type of fixed-rate mortgage in which the payment increases gradually from an initial low base level to a desired, final level. Typically, the payments will grow 7-12% annually from their initial base payment amount until the full payment is reached.

BREAKING DOWN 'Graduated Payment Mortgage'

In a graduated payment mortgage, only the low initial rate is used to qualify the buyer, which allows many people who might not otherwise qualify for a mortgage to own a home. This type of mortgage payment system may be optimal for young homeowners as their income levels gradually rise to meet higher mortgage payments.

RELATED TERMS
  1. Graduation Rate

    The percentage increase in the monthly payment on a graduated ...
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  3. Graduation Period

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  4. Fixed-Rate Mortgage

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  5. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  6. Bi-weekly Mortgage

    A mortgage payment plan where payments are made every two weeks, ...
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