Graduated Payment Mortgage

A type of fixed-rate mortgage in which the payment increases gradually from an initial low base level to a desired, final level. Typically, the payments will grow 7-12% annually from their initial base payment amount until the full payment is reached.

Investopedia Says:
In a graduated payment mortgage, only the low initial rate is used to qualify the buyer, which allows many people who might not otherwise qualify for a mortgage to own a home. This type of mortgage payment system may be optimal for young homeowners as their income levels gradually rise to meet higher mortgage payments.

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Mortgage featuring lower monthly payments at first, which steadily rise until they level off after a few years. GPMs, also known as "jeeps," are designed for young couples whose income is expected to grow as their careers advance. A graduated-payment mortgage allows such a family to buy a house that would be unaffordable if mortgage payments started out at a high level. Persons planning to take on such a mortgage must be confident that their income will be able to keep pace with the rising payments. See also Adjustable-Rate Mortgage; Conventional Mortgage; Reverse-Annuity Mortgage; Variable-Rate Mortgage.

Fixed rate mortgage with low payments in the early years, and higher payments later on, designed to meet the financing needs of young home owners with growing incomes. Also known in the trade as a "Jeep" mortgage. The most popular versions of the GPM are 30-year mortgages with payments that rise by a fixed amount each year for the first five to ten years and then level off. Lenders usually charge a slightly higher rate on a GPM than a Conventional Mortgage, because part of the interest due is deferred until the later years. Even though borrowers ultimately pay more for a GPM, the lower initial payments make this kind of mortgage more affordable to home buyers whose incomes could not support a conventional mortgage loan. A variation is the adjustable rate graduated payment mortgage, which has an interest rate that is adjusted every three to five years. See also Adjustable Rate Mortgage; Alternative Mortgage Instrument.

A mortgage requiring lower payments in early years than in later years. Payments increase in steps each year until the installments are sufficient to amortize the loan.
Example: A GPM may be made in which monthly payments rise by a set percentage after each year for the first 4 years. The payments would look like Figure.