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. Fixed Interest Rate

    An interest rate on a liability, such as a loan or mortgage, ...
  4. Deferred Interest

    The amount of interest that is added to the principal balance ...
  5. Negative Amortization

    An increase in the principal balance of a loan caused by making ...
  6. Adjustable-Rate Mortgage - ARM

    A type of mortgage in which the interest rate paid on the outstanding ...
RELATED FAQS
  1. What are the pros and cons of consolidating my student loans?

    Many students graduate with more than one student loan, and some graduate with as many as a dozen or more. If you currently ... Read Full Answer >>
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
  3. Economics

    How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.
  4. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  5. Options & Futures

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  6. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  7. Stock Analysis

    How Two Harbors' Derivatives Work?

    Mortgage REITs, like Two Harbors , have cut their dividend payments as interest rate trends have eaten into profitability under the business models.
  8. Stock Analysis

    How Chimera Investment Bear The Brunt Of REITst?

    Following the financial crisis, REITs that specialized in investing in mortgage-backed securities produced huge gains for their shareholders.
  9. Credit & Loans

    Reverse Mortgages: How To Find A Good One

    Finding a reverse mortgage generally means using a lender that specializes in them. Here's how to find a reputable one.
  10. Stock Analysis

    How Are Interest Rates Affecting Annaly Cap Mgmt?

    Annaly Capital Management reported a net loss of $658 million thanks to the mortgage REIT's strategy of hedging its exposure to higher interest rates.

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center