Graduated payments

Graduated payments are repayment terms involving gradual increases in the payments on a closed-end obligation. A graduated payment loan typically involves negative amortization, and is intended for students in the case of student loans,^[1] and homebuyers in the case of real estate,^[2] who currently have moderate incomes and anticipate their income will increase over the next 5–10 years.

All Federal Housing Administration (FHA) lenders can offer a FHA Graduated payment mortgage loan, which begin with a lower monthly payment that increases annually over the first 5–10 years of the loan, and then it levels out to a fixed monthly payment for the remaining years of the mortgage. There are five FHA Graduated Payment Mortgages offered in 15-year and 30-year terms. The difference between the plans lies in the rate of increase of the mortgage payment, which annually increases 2.5%, 5%, or 7.5% until it levels off.^[3]

References

External links

• StudentAid.ed.gov Graduated Plan