GRADUATED PAYMENT MORTGAGE Definition

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GRADUATED PAYMENT MORTGAGE (GPM) ia a mortgage that features negative amortization in which early payments are insufficient to pay the interest due on the outstanding principal. As a result, the unpaid interest is added to the principal, thereby increasing the balance owed. The payments must graduate or increase over time until they can completely amortize the loan's remaining principal balance by its maturity. The number, frequency and rate of increases are specified in the original contract.

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