Graduated Payment Mortgage

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. Growing-Equity Mortgage

    A fixed rate mortgage on which the monthly payments increase ...
  2. Negative Amortization

    An increase in the principal balance of a loan caused by making ...
  3. Biweekly Mortgage

    A mortgage with principal and interest payments due every two ...
  4. Interest Due

    The portion of a current mortgage payment that is comprised of ...
  5. Servicing Fee

    A percentage of each mortgage payment made by a borrower to a ...
  6. Term Payment Plan

    An option for receiving reverse mortgage proceeds that gives ...
Related Articles
  1. Credit & Loans

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  2. Options & Futures

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  3. Home & Auto

    5 Reasons To Save For A Big Mortgage Down Payment

    You may be anxious to buy a home, but taking time to save a large down payment has numerous advantages.
  4. Credit & Loans

    Mortgage Basics: Costs

    By Lisa SmithPeople generally think about a mortgage in terms of the monthly payment. While that payment represents the amount of money needed each month to cover the debt on the property, the ...
  5. Options & Futures

    Be Mortgage-Free Faster

    Getting rid of this debt faster has bigger benefits than you might think.
  6. Home & Auto

    Understanding The Mortgage Payment Structure

    While a mortgageā€™s size and term set the baseline, the interest, taxes and insurance all influence the amount of the monthly payment.
  7. Home & Auto

    Homebuyers' Walkthrough: Which Type Of Mortgage Is Best?

    Most homebuyers will need to secure a mortgage to finance their home. The lending climate has changed following the late 2000s financial crisis, and it may be more difficult to get approved for ...
  8. Credit & Loans

    Should I Consolidate My Two Mortgages?

    Consolidating your loans or mortgage may make sense for you, especially when interest rates are low. Here's what you should know.
  9. Credit & Loans

    Mortgage Basics: Conclusion

    By Lisa SmithLet's recap what we've learned in this tutorial: At its most basic, a mortgage is a loan used to purchase a house. There are two primary types of mortgages: fixed rate and ...
  10. Credit & Loans

    The Best Mortgage Deal (May Not Be What You Think)

    Don't judge a mortgage solely by payment amount. Here's what insiders know about choosing the most advantageous mortgage offer.
RELATED FAQS
  1. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  2. How does the loan-to-value ratio affect my mortgage payments?

    Understand what the loan to value ratio is, how the ratio is calculated and learn how it has an impact on your mortgage payments ... Read Answer >>
  3. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
  4. Joe just bought a house for $750,000, of which 65% was financed with a 20 year ... ...

    The correct answer is: c) Step 1: Compute the amount of the mortgage 65% of 750,000 = 487,500 Step 2: Compute the annual ... Read Answer >>
  5. Why would a homebuyer need to take out PMI (private mortgage insurance)?

    Learn why some home buyers are required to take out private mortgage insurance (PMI), and how it affects the total monthly ... Read Answer >>
  6. What are the requirements to apply for a reverse mortgage loan?

    For homeowners of a certain age who wish to stay in their homes but are finding it costly, a reverse mortgage could be the ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center