What is the primary difference between a Graduated Payment Mortgage and a Growth Equity Mortgage?

The primary distinction between a Graduated Payment Mortgage and a Growth Equity Mortgage lies in how the payment structure affects principal reduction. In a Graduated Payment Mortgage, borrowers begin with lower payments that gradually increase over time at predetermined intervals, allowing for predictable cash flow management during the early years of the loan.

In contrast, a Growth Equity Mortgage is designed to facilitate increased equity gain over time, with payments that typically increase and are specifically directed toward principal reduction, thus accelerating equity accumulation. This means that while a borrower’s monthly payments may rise, the emphasis of that increase is on reducing the principal balance, which is beneficial for building equity faster.

Understanding this mechanism is crucial for borrowers or industry professionals, as it not only influences payment calculations but also impacts overall financial strategies related to home ownership.