In real estate finance, a Graduated Payment Mortgage is a type of loan that allows for lower initial payments by deferring a portion of the principal at the beginning of the loan term. During the early years, typically the first three to five years, payments are reduced to make the loan more affordable for borrowers with expected future income growth.
After the initial period, the principal and interest payments increase substantially to compensate for the deferred principal payments. This type of mortgage is often paired with a variable or adjustable interest rate and is designed for borrowers who anticipate rising income over time.
