Graduated Payment Mortgage
A graduated payment mortgage is a type of mortgage loan where the payments start off low, increase at preset times, and then stabilize. The difference between a graduated payment mortgage and an adjustable rate mortgage is that a borrower who takes out a graduated payment mortgage will know what the payments will be through the duration of the mortgage loan, even though the payments change. The initial lower payments are not sufficient to amortize the loan, and the interest is not large enough to cover the interest due on the loan. The result is that the interest that is not paid during the loan is added to the principal amount of the mortgage. This is known as negative amortization. If this loan is not used properly, there can be adverse affects. Your mortgage professional will be able to show you how to properly manage and benefit from negative amortization loans such as the GPM.
As opposed to ARM's, Graduated Payment Mortgages have a fixed note rate / payment schedule. With a GPM the payments are generally fixed for one year at a time. Each year the payments graduate at 7.5% - 12.5% of the previous years payment. A GPM has a fixed payment schedule so the additional principal payments reduce the term of the loan.
Call and speak with us today and one of our loan consultants will guide you toward the best loan option for your needs. We will gladly answer all of your questions and provide you with valuable, money saving information.
