Graduation Rate

AAA

DEFINITION of 'Graduation Rate'

The percentage increase in the monthly payment on a graduated payment mortgage. The increase occurs at set intervals, usually annually. The interest rate on a graduated payment mortgage is fixed for the life of the loan. The initial monthly payments are set below a fully amortizing payment, and increase at the graduation rate over the graduation period until the payment becomes large enough to amortize the mortgage over its remaining term.

INVESTOPEDIA EXPLAINS 'Graduation Rate'

Graduated payment mortgages are similar to payment option ARMs in that both will likely have negative amortization. However, unlike a payment option ARM, the exact payments and amount of negative amortization can be known for certain on a graduated payment mortgage.

RELATED TERMS
  1. Negative Amortization

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

    A type of fixed-rate mortgage in which the payment increases ...
  3. Deferred Interest

    The amount of interest that is added to the principal balance ...
  4. Graduation Period

    The period of time on a graduated payment mortgage during which ...
  5. Forbearance

    A temporary postponement of mortgage payments.
  6. Mortgage Modification

    A permanent change in a homeowner's home loan terms that makes ...
Related Articles
  1. How Interest Rates Affect The Housing ...
    Economics

    How Interest Rates Affect The Housing ...

  2. Make A Risk-Based Mortgage Decision
    Options & Futures

    Make A Risk-Based Mortgage Decision

  3. Option ARMs: American Dream Or Mortgage ...
    Home & Auto

    Option ARMs: American Dream Or Mortgage ...

  4. How Does A Reverse Mortgage Work?
    Retirement

    How Does A Reverse Mortgage Work?

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center