Graduated Payment Mortgage (GPM)
A GPM features payments that start low and gradually increase over 5-10 years before leveling off. Designed for borrowers expecting income growth, GPMs may involve negative amortization during early years.
How It Works
- Fixed interest rate with predetermined payment increases
- Payments start below standard fixed-rate level
- Gradually increase over 5-10 years
- Level off for remaining term
- Available through FHA Section 245 program
GPM vs. ARM
- GPM: Fixed rate, predetermined increases, predictable
- ARM: Variable rate, market-dependent adjustments
- Both designed for rising-income borrowers
- GPM provides more payment predictability
Risks
Negative amortization, potential underwater balance, payment shock if income doesn't keep pace, difficult refinancing, and higher total interest cost.
Related Terms
- Equity — Negative amortization reduces equity
- Encumbrance — Mortgage as lien
- Closing — GPM terms at closing
Barnes Walker Real Estate
Barnes Walker's attorneys review mortgage structures and advise Florida borrowers on loan options. Request a legal inquiry for assistance.
Florida Law Reference
Fla. Stat. Ch. 697
Defines mortgages as liens on real property and establishes requirements for mortgage creation, assignment, and satisfaction in Florida.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC