Graduated Payment Mortgage Calculator
See how payments start low and increase over time with a GPM.
Payment Schedule by Year
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A graduated payment mortgage (GPM) starts with lower payments that increase each year for a set period. This calculator shows you the full payment trajectory:
- Enter the loan amount. This is your mortgage principal after subtracting the down payment from the home price.
- Set the interest rate. Enter the fixed rate for your loan. GPM rates are sometimes slightly higher than standard fixed-rate mortgages to offset the early lower payments.
- Choose the loan term. The total repayment period, typically 30 years.
- Set the graduation rate. This is the percentage by which your monthly payment increases each year during the graduation period. Common rates range from 2.5% to 7.5% per year.
- Choose the graduation period. The number of years during which payments increase. After this period, payments remain level for the rest of the loan. Common choices are 5 or 7 years.
The calculator shows your initial (lowest) payment, the final (level) payment, and a comparison to a standard fixed payment. The year-by-year schedule table shows exactly how payments change over time. If early payments do not cover the interest owed, the calculator flags the negative amortization amount.
About Graduated Payment Mortgages
A graduated payment mortgage is designed for borrowers who expect their income to rise over time. Payments start below the standard fully amortizing amount and increase by a fixed percentage each year for a set period (usually 5 to 10 years), then remain level for the rest of the term.
The risk is negative amortization: if early payments are too low to cover the monthly interest charge, the unpaid interest gets added to the principal. This means you temporarily owe more than you originally borrowed. GPMs are less common today but are still available through FHA (Section 245) and some portfolio lenders. All calculations run locally in your browser.
Frequently Asked Questions
What is negative amortization in a GPM?
Negative amortization occurs when your monthly payment is less than the interest owed on the loan. The shortfall is added to the principal balance, meaning you temporarily owe more than you borrowed. This is common in the early years of a GPM with aggressive graduation rates.
How does a GPM compare to a standard fixed-rate mortgage?
A GPM has lower initial payments but higher payments later. The total interest paid over the life of the loan is typically higher than a standard fixed-rate mortgage because of the negative amortization period and potentially higher rate. A GPM makes sense if you are confident your income will grow significantly.
Who is a GPM best suited for?
GPMs suit borrowers with reliable income growth expectations, such as early-career professionals, medical residents, or those with predictable salary progression. If your income is uncertain or you plan to stay at the same salary, a standard fixed-rate mortgage is usually a better fit.