A graduated-payment mortgage begins with scheduled payments that are lower during the initial years of the loan. The payments then increase according to a predetermined schedule before becoming level for the remaining loan term.
With some graduated-payment mortgages, the initial payments may be less than the interest accruing on the loan. The unpaid interest is added to the principal balance. This is called negative amortization and causes the amount owed to increase before it begins to decrease.
Because the payments are scheduled to rise, borrowers should carefully consider their ability to manage the future payments and the loan’s total cost.
Program availability is limited, and terms and qualification requirements vary. Our team can confirm whether a graduated-payment option is currently available and explain the complete payment schedule.