Graduated payment mortgages are loans that offer low initial monthly payments that gradually increase by a predetermined amount at predetermine times during the life of the loan. Unlike adjustable-rate mortgages, buyers know up-front how much payments will rise in the future. Payments are usually fixed for one year at a time and increase about seven to 12 percent from the previous year's payment. The advantage of graduated payment mortgages is that they offer more affordable payments in the beginning years of your loan than other types of mortgages. As a result, graduated payment mortgages can often facilitate early home ownership for borrowers who expect their incomes to rise. Lenders may offer several different graduated payment plans, which can vary in the rate of payment increases and the number of years over which the payments will increase. Generally, the greater the rate of increase or the longer the period of increase, the lower the mortgage payments are in the early years. Lower initial payments may then consequently allow you to qualify for a larger loan amount.
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