Graduation Period
Categories: Education
You just graduated from grad school, paid off most of your student loans, and now you’re expecting your income to increase, gradually. So you opt for a graduated payment mortgage: a type of fixed-rate mortgage that has gradually increasing payments (they do level out eventually).
The graduation period is that time when your payments for your graduated payment mortgage are still rising. The payments start low, and increase at set intervals (like annually), eventually reaching a set payment amount that will remain fixed for the remainder of the loan term.
If you’re familiar with ARMs (adjustable rate mortgages), graduated payment mortgages are kind of like that, except predictable and stable, since it’s all written out in the contract (rather than based on market conditions in flux). The graduation period is something homebuyers should only sign up to deal with if they know their income will rise, too.