What type of mortgage features flexible payments that increase for a specified time before leveling off?

What type of mortgage features flexible payments that increase for a specified time before leveling off?

• A. Balloon Mortgage
• B. Graduated Payment Mortgage (GPM)
• C. Adjustable Rate Mortgage
• D. Interest-Only Mortgage

Answer: (B)

A Graduated Payment Mortgage (GPM) is designed specifically to accommodate borrowers who may expect their income to increase over time. This type of mortgage features payment amounts that begin lower than standard amortizing payments, with the mortgage payments gradually increasing at predetermined intervals. After a set period and once the anticipated financial growth occurs, the payments level off to a fixed amount for the remainder of the loan term. This structure can be particularly appealing for first-time homebuyers or those entering a new job with expected future salary increases, as it can make initial monthly payments more manageable. The predictable increases enable borrowers to budget for their escalating payments over the early years of the mortgage. While other mortgage types may offer various benefits, they do not share the specific feature of scheduled increasing payments followed by leveling off that is characteristic of a Graduated Payment Mortgage.

A Graduated Payment Mortgage (GPM) is designed specifically to accommodate borrowers who may expect their income to increase over time. This type of mortgage features payment amounts that begin lower than standard amortizing payments, with the mortgage payments gradually increasing at predetermined intervals. After a set period and once the anticipated financial growth occurs, the payments level off to a fixed amount for the remainder of the loan term.

This structure can be particularly appealing for first-time homebuyers or those entering a new job with expected future salary increases, as it can make initial monthly payments more manageable. The predictable increases enable borrowers to budget for their escalating payments over the early years of the mortgage.

While other mortgage types may offer various benefits, they do not share the specific feature of scheduled increasing payments followed by leveling off that is characteristic of a Graduated Payment Mortgage.