A graduated payment mortgage is a loan where the payment increases each year for a predetermined amount of time (such as 5 or 10 years), then becomes fixed for the remaining duration of the loan.
When interest rates are high, borrowers can use a graduated payment mortgage to increase their chances of qualifying for the loan because the initial payment is less. The downside of opting for an smaller initial payment is that the interest owed increases and the payment shortfall from the initial years of the loan is then added on to the loan, potentially leading to a situation called "negative amortization." Negative amortization occurs when the loan payment for any period is less than the interest charged over that period, resulting in an increase in the outstanding balance of the loan.
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Sterling Mortgage Services
CA BROKER NMLS
Company NMLS: 1460556 | CalBRE ID: 01376997
Licensed Only In: CA
www.nmlsconsumeraccess.org
Sterling Mortgage Services
Folsom, CA 95630
Phone: (855) 870-7334
info@sterlingmortgagehomeloans.com
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