Graduated Mortgage Payment
In general, GPMs were
created to facilitate early home ownership
for borrowers who expect their incomes
to increase. GPM programs allow homeowners
to make smaller monthly payments initially
and to increase their size gradually over
time. GPMs may also be beneficial for homeowners
who plan to move or refinance relatively
quickly.
A GPM allows a borrower
to qualify at a payment lower than a comparable
fixed-rate loan. By qualifying at a relatively
lower payment, one can obtain a larger loan
and potentially purchase a higher-priced
home.
A
GPM's initial payments are lower than the
minimum required to amortize the loan.
Over a predetermined period of two to seven
years, the payments increase by approximately 7.5
to 12.5 percent per year. Since the initial
monthly payments are insufficient to amortize
the loan, these loans feature negative
amortization--the loan balance increases
in the early years. A borrower has the
option, however, to pay the fully-amortized
payment and avoid negative amortizazion.
There is a premium for receiving
the benefits of a lower initial monthly payment--the
interest rate is approximately .5 to .75
percent higher than a comparable fixed-rate
mortgage. GPMs are available for Conforming
and Jumbo loans. |
Mortgage Programs
