The Graduated-Payment Mortgage: Solving the Initial Payment Enigma

Daniel Winkler and Donald Jud

Journal of Real Estate Practice and Education, 1998, vol. 1, issue 1, 67-79

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.

Date: 1998
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DOI: 10.1080/10835547.1998.12091557

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