While Graduated Payment Mortgages offer unique advantages, they also come with some risks and factors to consider:

• Negative Amortization: One of the primary risks of a Graduated Payment Mortgage is negative amortization. This occurs when your initial payments are not large enough to cover the full interest due on the loan. The unpaid interest is then added to your loan balance, causing your principal balance to increase over time instead of decrease. This can put you in a situation where you owe more on your mortgage than your home is worth, especially if home values do not appreciate as expected.
• Higher Future Payments: As your payments increase during the graduated period, it’s important to ensure that your income will be able to keep up with the rising costs. The jump in payments can be substantial, so you’ll need to plan ahead to avoid financial strain when your payments peak.
• Limited Equity Growth: During the early years of the loan, when your payments are lower, you’ll be building equity at a slower pace. This means that if you sell your home before the graduated period ends, you may not have built up as much equity as you would have with a traditional fixed-rate mortgage.
• Long-Term Costs: Although Graduated Payment Mortgages offer lower payments upfront, they can end up costing more over the life of the loan. This is because the deferred interest from the initial lower payments can increase the total amount of interest you pay over the course of the mortgage.