Graduated Payment Mortgages

A Graduated Payment Mortgage (GPM) is a type of loan structured to have initially low payments which gradually increase over a set period, typically 5 to 10 years, before stabilizing into a fixed payment for the remainder of the loan term. This arrangement can be particularly advantageous in high-interest rate environments, allowing borrowers to qualify more easily due to the lower initial payments. However, this benefit comes with the risk of negative amortization, where the loan balance can increase if the payments are insufficient to cover the interest accrued.