Buying and enjoying your own home is a fundamental part of the American dream. Everyone wants a place they can call their own and be proud of. In order to acquire your own home, you may need to get what's called a graduated mortgage payment. A graduated mortgage payment lets you make smaller, lower mortgage payments at the beginning of the life of your loan, and then make higher payments as time goes by.
A graduated payment mortgage, commonly referred to as a GPM, allows people to pay a lower initial monthly mortgage payment. That payment on a graduated payment mortgage will start to rise, after a certain period of time has passed as stipulated by the contracts of the mortgage. The reason why people get a graduated payment mortgage is because they can't qualify for a typical fixed-rate mortgage. With a graduated payment mortgage, they get to finally buy their own home.
There are some obvious downsides to getting a graduated payment mortgage. The initial payments on a GPM don't cover all the interest, so that means the remaining difference will be added on to the principal of their loan. So, let's say you get a graduated mortgage payment loan of $100,000. The GPM mortgage payment is $800, but the interest charged is actually $,1000. That means that the remaining $200 will be added to the initial loan, so at the end of the first month, the amount of your loan has grown to $100,200. This will be the case until a certain point in the lifespan of your loan, when your graduated loan payments rise to a certain amount (in this example, $1,100) where a portion of the monthly payment can go towards paying off the principal.
Graduated payment mortgages are not for everyone, so if you're thinking of getting one then be sure to go over it in great detail with a financial advisor before you commit to it. You want to be sure you understand what you're getting yourself into.
