Graduated payment mortgages (GPM) offer financing solutions for those who expect their income to rise in the future. A hybrid of an adjustable rate mortgage and fixed-rate mortgage, a GPM with its fixed interest rate starts with low payments that increase yearly based on the loans terms. If you have considered an interest only mortgage loan in the past, you might want to consider the benefits of a graduated payment mortgage instead.
GPM Features
A GPM offers low monthly payments by increasing payments for the rest of the loans term. At the beginning your mortgage will not completely cover your interest charges (negatively amortizing), but larger payments will be made later on to cover both interest and principal.
Generally, a GPMs beginning payments will be a couple of hundred dollars less than a comparable fixed-rate mortgage. However, in later years you can expect to pay at least a hundred dollars more in monthly payments than a fixed rate mortgage payment.
Lenders also offer several different types of payment plans. The most common is to graduate payments annually for the first seven years, after which payments remain the same. Longer graduated...
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