Graduated Payment Mortgage Loan Law and Legal Definition

According to 38 CFR 36.4301 [Title 38 -- Pensions, Bonuses, and Veterans' Relief; Chapter I -- Department of Veterans Affairs; Part 36 -- Loan Guaranty; Subpart B -- Guaranty or Insurance of Loans to Veterans With Electronic Reporting], graduated payment mortgage loan means “a loan for the purpose of acquiring a single-family dwelling unit involving a plan for repayment in which a portion of the interest due is deferred for a period of time. The interest so deferred is added to the principal balance thus resulting in a principal amount greater than at loan origination (negative amortization). The monthly payments increase on an annual basis (graduate) for a predetermined period of time until the payments reach a level which will fully amortize the loan during the remaining loan term.”