Graduated payments are
repayment terms involving gradual increases in the payments on a closed-end obligation. A graduated payment
loan
In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that ...
typically involves
negative amortization
In finance, negative amortization (also known as NegAm, deferred interest or graduated payment mortgage) occurs whenever the loan payment for any period is less than the interest charged over that period so that the outstanding balance of the loa ...
, and is intended for students in the case of student loans, and homebuyers in the case of real estate, who currently have moderate incomes and anticipate their income will increase over the next 5–10 years.
All
Federal Housing Administration
The Federal Housing Administration (FHA), also known as the Office of Housing within the Department of Housing and Urban Development (HUD), is a United States government agency founded by President Franklin Delano Roosevelt, created in part by ...
(FHA) lenders can offer a FHA
Graduated payment mortgage loan A graduated payment mortgage loan, often referred to as GPM, is a mortgage with low initial monthly payments which gradually increase over a specified time frame. These plans are mostly geared towards young people who cannot afford large payments no ...
, which begin with a lower monthly payment that increases annually over the first 5–10 years of the loan, and then it levels out to a fixed monthly payment for the remaining years of the mortgage. There are five FHA Graduated Payment Mortgages offered in 15-year and 30-year terms. The difference between the plans lies in the rate of increase of the mortgage payment, which annually increases 2.5%, 5%, or 7.5% until it levels off.
References
External links
Dentist Mortgage Loans
Personal finance
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