Mortgage with scheduled payment increases over time, often used when the borrower expects rising income but accepts higher later payment risk.
A graduated payment mortgage (GPM) is a mortgage with payments that start lower and then rise on a preset schedule before leveling off.
Graduated payment mortgages matter because they shift affordability from the present into the future. They can make homeownership easier to enter when the borrower expects income growth, but they also raise the risk that later scheduled payments become too heavy.
Some GPM structures can also create negative amortization in the early years if the scheduled payment is not high enough to cover the full interest charge.
The central feature is a contractual payment schedule with step-ups over time.
Where:
g is the scheduled growth rate
t is the number of payment-step periods elapsed
| Mortgage type | Payment path | Main tradeoff |
| — | — | — |
| Self-amortizing mortgage | Level scheduled payment | Stable payments, slower early affordability relief |
| Graduated payment mortgage | Starts lower, then rises by schedule | Easier start, higher future payment risk |
| Growing-equity mortgage | Starts higher or rises to accelerate payoff | Faster equity buildup, less early affordability relief |