Graduation Period

AAA

DEFINITION of 'Graduation Period'

The period of time on a graduated payment mortgage during which the monthly payment rises by a certain percentage at set intervals, usually annually. The interest rate at which monthly payments are set to increase by is fixed over the entire graduation period. If the actual payment is less than what an interest-only payment would be, negative amortization is created.

INVESTOPEDIA EXPLAINS 'Graduation Period'

Graduated-payment mortgages are similar to payment option adjustable-rate mortgages (ARMs); however, a graduated-payment mortgage is a fixed-rate mortgage. The benefit of a graduated-payment mortgage over a payment option ARM is that the borrower knows in advance, and for certain, what the payments and remaining principal balance of the mortgage will be over the entire life of the mortgage.

RELATED TERMS
  1. Payment Option ARM

    A monthly adjusting adjustable-rate mortgage (ARM) which allows ...
  2. Graduation Rate

    The percentage increase in the monthly payment on a graduated ...
  3. Adjustable-Rate Mortgage - ARM

    A type of mortgage in which the interest rate paid on the outstanding ...
  4. Fixed Interest Rate

    An interest rate on a liability, such as a loan or mortgage, ...
  5. Negative Amortization

    An increase in the principal balance of a loan caused by making ...
  6. Graduated Payment Mortgage

    A type of fixed-rate mortgage in which the payment increases ...
Related Articles
  1. 4 Steps To Attaining A Mortgage
    Credit & Loans

    4 Steps To Attaining A Mortgage

  2. Mortgages: Fixed-Rate Versus Adjustable-Rate
    Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

  3. How Interest Rates Affect The Housing ...
    Economics

    How Interest Rates Affect The Housing ...

  4. Understanding Your Mortgage
    Personal Finance

    Understanding Your Mortgage

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center