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. Credit & Loans

    What are the pros and cons of consolidating ...

  2. Credit & Loans

    4 Steps To Attaining A Mortgage

  3. Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

  4. Economics

    How Interest Rates Affect The Housing ...

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center