Graduated Payment Mortgages

Definition - What does Graduated Payment Mortgages mean?

Graduated payment mortgages are mortgages in which the initial payments are smaller, and they gradually build up to a fixed level that is significantly higher than the start level. These mortgages often increase from 7 to 12% per year. In the context of the law, borrowers must obtain approval for the mortgage from the lender, and they must pay on schedule or potentially face foreclosure.

Justipedia explains Graduated Payment Mortgages

Graduated payment mortgages are commonly used by people who expect to make more money in the future, such as young people or people who believe that they will advance their careers as time goes on. Graduated payment mortgages tend to be more expensive overall than other types of mortgages. This is because they take longer to pay off since the payments are smaller in the beginning. The more interest accrues, the longer it takes to repay the mortgage.

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