GPM Graduated Payment Mortgages here in Colorado

The Colorado GPM is another alternative to the colorado conventional adjustable rate mortgage loans and is making a come back as Colorado borrowers and Colorado mortgage companies seek alternatives to assist in qualify for home financing here when you buy, with the higher cost of homes in the surrounding Denver Metro, GPM loans are becoming great options. Call us TODAY at 808-357-5326 for more info.

Unlike a Colorado Adjustable Rate Mortgage, GPMs have a fixed note rate and payment schedule. With a GPM the payments are usually fixed for one year at a time. Each year for five years the payments graduate at 7.5% - 12.5% of the previous years payment. As you can see, this is an attractive option for borrowers here.

Colorado GPMs are available in 2 loan products right now for colorado home loans and are 30 year and 15 year amortization loan programs, and for both conforming and jumbo loans. the jumbo product might be a good way to go on the GPM as our bank does allot here in Colorado and we get better pricing since we deal in the volume of GPM's. With the graduated payments and a fixed note rate, GPMs have scheduled negative amortization of approximately 5% - 8% of the loan amount depending on the note rate. The higher the note rate the larger degree of negative amortization. This compares to the possible negative amortization of a monthly adjusting ARM of 10% of the loan amount. Both loans give the borrower the ability to pay the additional principal and avoid the negative amortization. In contrast, the GPM has a fixed payment schedule so the additional principal payments reduce the term of the loan. The ARMs additional payments avoid the negative amortization and the payments decrease while the term of the loan remains constant.

The scheduled negative amortization on a GPM differs depending on the amortization schedule, the note rate and the payment increases of the loan. GPM loans with 7.5% annual payment increases offer the lowest qualifying rate but the largest amount of negative amortization.

On a loan of $150,000, with a 30 year amortization and a note rate of 10.50% with 12.5% annual payment increases, the negative amortization continues for 60 months. The qualifying rate is 5.75% and the negative amortization is 11.34% (approximately $17,010).The note rate of a GPM is traditionally .5% to .75% higher than the note rate of a straight fixed rate mortgage. The higher note rate and scheduled negative amortization of the GPM makes the cost of the mortgage more expensive to the borrower in the long run. In addition, the borrowers monthly payment can increase by as much as 50% by the final payment adjustment The lower qualifying rate of the GPM can help borrowers maximize their purchasing power, and can be useful in a market with rapid appreciation. In markets where appreciation is moderate, and a borrower needs to move during the scheduled negative amortization period they could create an unpleasant situation.