Interest Only Mortgage Consider A Graduated Payment Mortgage

Interest Only Mortgage Consider A Graduated Payment Mortgage



Interest Only Mortgage? Consider a​ Graduated Payment Mortgage
Graduated payment mortgages (GPM) offer financing solutions for those who expect their income to​ rise in​ the​ future .​
a​ hybrid of​ an​ adjustable rate mortgage and fixed-rate mortgage,​ a​ GPM with its fixed interest rate starts with low payments that increase yearly based on​ the​ loan’s terms .​
If you​ have considered an​ interest only mortgage loan in​ the​ past,​ you​ might want to​ consider the​ benefits of​ a​ graduated payment mortgage instead.
GPM Features
A GPM offers low monthly payments by increasing payments for the​ rest of​ the​ loan’s term .​
At the​ beginning your mortgage will not completely cover your interest charges (negatively amortizing),​ but larger payments will be made later on​ to​ cover both interest and principal.
Generally,​ a​ GPM’s beginning payments will be a​ couple of​ hundred dollars less than a​ comparable fixed-rate mortgage .​
However,​ in​ later years you​ can expect to​ pay at​ least a​ hundred dollars more in​ monthly payments than a​ fixed rate mortgage payment.
Lenders also offer several different types of​ payment plans .​
The most common is​ to​ graduate payments annually for the​ first seven years,​ after which payments remain the​ same .​
Longer graduated periods or​ a​ greater rate of​ increase can lower your initial payments even more.
GPM Benefits
A GPM allows a​ borrower to​ enjoy low monthly payments with the​ security of​ a​ fixed-rate .​
Most homebuyers expect their income to​ increase if​ only due to​ inflation .​
a​ GPM takes advantage of​ this situation by increase payments as​ your income should increase.
A GPM also allows you​ more buying power based on​ the​ lower monthly payments and expectation of​ increased income .​
With initial reduced payments,​ you​ can pay for moving expenses and home furnishings.
GPM Drawbacks
Like with any type of​ mortgage loan,​ you​ need to​ weigh all the​ factors before choosing a​ GPM .​
One of​ the​ risks with a​ GPM is​ that you​ may not be able to​ afford the​ higher monthly mortgage payments,​ which could threaten your financial situation.
You may also find that if​ you​ have to​ move within a​ couple of​ years that you​ may owe on​ the​ loan after selling due to​ negative amortization .​
Even if​ you​ don’t owe interest,​ you​ will have very little equity in​ the​ home until several years into your mortgage.
Consider your financial goals with different financing packages to​ find the​ best fit.




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