A graduated payment mortgage (GPM) is a type of loan where the monthly payments start lower and gradually increase over a specified period, often 5 or 10 years, before leveling off for the remainder of the loan term. This initial lower payment makes it easier for borrowers to qualify for the loan, especially when interest rates are high.

One benefit of a GPM is that it allows borrowers to purchase a more expensive home than they might otherwise afford with a traditional fixed-rate mortgage. This can be particularly advantageous for first-time homebuyers or those with limited incomes.

However, there are risks associated with GPMs. Because the initial payments are lower than the interest owed, the unpaid interest is added to the principal balance of the loan. This can lead to negative amortization, where the loan balance actually increases over time instead of decreasing. As a result, borrowers may end up owing more on their loan than they originally borrowed.

It's important for borrowers considering a GPM to carefully weigh the potential benefits against the risks and ensure they understand how their payments will change over time. Consulting with a financial advisor or mortgage professional can help borrowers make an informed decision about whether a GPM is the right choice for their financial situation.