What does a Graduated Payment Mortgage feature?

A Graduated Payment Mortgage (GPM) is designed to help borrowers who expect their income to increase over time. This mortgage structure starts with lower initial payments that gradually increase at specified intervals throughout the loan term. The idea is that while the borrower may have a tighter budget initially, they anticipate that they will earn more in the future, allowing them to manage the increasing payment amounts effectively as their financial situation improves.

This type of mortgage is particularly appealing for first-time homebuyers or individuals entering a career where salaries are expected to rise significantly in the coming years. The gradual increase in payments can provide relief in the earlier years of homeownership, alleviating financial pressure when income may be limited.

In contrast, other mortgage features like fixed payments or interest-only payments do not provide those early advantages and flexibility that a GPM offers. A fixed payment mortgage would mean consistent payments throughout the loan term, while a GPM allows for the financial planning and anticipation of increased earnings.