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The Graduated-Payment Mortgage: Solving the Initial Payment Enigma

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  • Daniel Winkler
  • Donald Jud

Abstract

Executive Summary: The graduated-payment mortgage (GPM) has a unique stair-step payment schedule that often enhances borrower qualification for young, first-time home buyers who are anticipated to have increasing incomes. The determination of the initial payment on a GPM mortgage is often regarded as complex; therefore, textbook authors normally disregard its theoretical development and substitute instead GPM interest factor tables. This study develops a general equation for finding the initial payment on a GPM and programmable calculator and computer spreadsheet routines for implementing the general equation. This approach enhances the technical understanding of the GPM, and it offers more flexibility than a table approach.

Suggested Citation

  • Daniel Winkler & Donald Jud, 1998. "The Graduated-Payment Mortgage: Solving the Initial Payment Enigma," Journal of Real Estate Practice and Education, Taylor & Francis Journals, vol. 1(1), pages 67-79, January.
    • Handle: RePEc:taf:rjrpxx:v:1:y:1998:i:1:p:67-79
    DOI: 10.1080/10835547.1998.12091557
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