A graduated payment mortgage may allow periodic repayments to increase by what percentage over ten years?

A graduated payment mortgage is designed to accommodate borrowers who anticipate that their income will increase over time. In this type of mortgage, the payments start lower than a traditional mortgage and increase annually by a predetermined percentage.

The correct choice, which allows for periodic repayments to increase by 3% over ten years, reflects a common structure for graduated payment mortgages. This 3% increase is generally accepted as a balanced approach, allowing individuals to manage their initial lower payments while gradually adjusting to higher payments as their finances improve.

This structure is particularly beneficial for first-time homebuyers or individuals in the early stages of their careers, as it aligns with their expected income growth. By capping the increase to 3% annually, the mortgage is designed to remain manageable for the borrower as they transition into their increased payment obligations.

Understanding these percentage increases is essential for recognizing how graduated payment mortgages function and their implications for long-term financial planning.