A Graduated Payment Mortgage, or GPM, is a 30-year fixed rate mortgage that offers borrowers lower monthly payments in the initial years of the loan. With a Graduated Payment Mortgage, borrowers monthly mortgage payments will gradually increase annually for the first 5 years of the loan. Starting in year 6, these payments level out and stay the same for the remainder of the loan term.
In today’s rate environment, the Graduated Payment Mortgage is perfect for the homeowners who are trying to save money on their mortgage payment in the first few years of the loan. It is a fixed-rate option that allows you to use paystubs or self-employed income to qualify!
Graduated Payment Mortgages from Newfi are a Non-QM mortgage option. Newfi offers both qualified (QM) and Non-Qualified (Non-QM) mortgages to help more borrowers finance their homes.
Graduated Payment Mortgages are one of Newfi’s unique mortgage solutions that offer borrowers specialized lending. Looking for other unique mortgage solutions? Visit our Loan Options page to see a full list of the mortgage options Newfi offers.
How Does a Graduated Payment Mortgage Work?
A Graduated payment mortgage is a 30-Year Fixed Rate Option, meaning that your interest rate stays the same throughout the life of the loan. It offers borrowers lower initial monthly payments compared to other mortgage options.
Lenders can offer borrowers a lower monthly payment to start with a GPM, which is what allows the borrowers to save on their mortgage payments in the initial years of the loan. A Graduated Payment Mortgage has a negative amortization schedule, where all unpaid interest in the initial years of the loan is added to the principal balance.
Borrowers qualify based on the largest payment over a 25-year amortization period, ensuring that they can afford the payments when they increase annually until year 6.
With a graduated payment mortgage, borrowers’ monthly payments increase annually by a percentage—this percentage is referred to as a graduation rate—for the first 5 years of the mortgage.
A GPM’s graduation rate is a predetermined percentage and does not change during the graduation period. At Newfi, your graduation rate on a graduated payment mortgage is 5%.
This allows borrowers to see exactly how much their mortgage payments will be each year when they sign for their loan. This avoids any unexpected payment increases.
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What are the Pros of a Graduated Payment Mortgage?
Lower Initial Monthly Payments
GPM’s offer borrowers lower monthly payments in the initial years of the mortgage. This is a great option for borrowers who are planning on increasing their income, or wanting to save out-of-pocket mortgage payments in the first years of the loan.
Unlike Adjustable Rate Mortgage options that some borrowers may use to lower their monthly payments, a graduated payment mortgage has a fixed interest rate. It is a 30-Year Fixed mortgage rate option.
Know Your Payment Schedule At Closing
Graduation rates don’t change during the 5 year graduation period. This means that borrowers know how much their monthly mortgage payments will increase when they close on their mortgage loan and can plan accordingly.
Who Could Benefit from a Graduated Payment Mortgage?
Graduated Payment Mortgages can be a great option for those borrowers who are looking for lower monthly payments right now.
These mortgages may also be a good option for self-employed borrowers, small business owners, and contractors. Newfi’s GPM allows borrowers to document their income using alternative income documentation such as:
- Business/Personal Bank Statements
- 1099 Income
- CPA Gross Receipts
- Any combination of the above
Please note that Newfi’s Graduated Payment Mortgages are only available in: Arizona, California (on Jumbo amounts only), Colorado, Florida, Georgia, Hawaii, Illinois, Maryland, Michigan, New Jersey, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, and Washington.
Graduated Payment Mortgages with Newfi
There are several reasons why people are looking to keep more money in their pockets right now. Whether you’d like to float yourself and your family through a turbulent economic time or are looking to pocket some extra savings just in case, Graduated Payment Mortgages may help you find the payments that make sense for you.
Interested in learning more about your mortgage options? Click here (link to new get started page) or call us at (888)316-3934 to get in touch with a Newfi Senior Loan Advisor today!
You can learn more about how Newfi helps people find the right mortgage solution for their unique situation by reading any of our 1,300+ reviews!