Finance
In Minnesota, which of the following correctly describes a 'graduated payment mortgage' (GPM)?
AThe interest rate gradually increases over the loan term
BMonthly payments start low and gradually increase over a specified period, after which they level off✓ Correct
CThe down payment is graduated based on the buyer's income
DThe property taxes are gradually reduced over the loan term
Explanation
A graduated payment mortgage has monthly payments that start below the fully amortizing level and gradually increase over 5-10 years, then level off. This helps buyers who expect income growth to qualify initially. Early in the loan, the low payments may not cover all accruing interest, creating negative amortization (the balance temporarily increases).
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