Price Level Adjusted Mortgage - PLAM
Barron's Banking Dictionary:
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Price Level Adjusted Mortgage (PLAM)
Form of Graduated Payment Mortgage in which the rate of interest paid remains fixed, but the outstanding balance is adjusted for inflation according to an appropriate price index. Periodically, according to a time schedule approved by both borrower and lender, the outstanding balance owed is revised for appreciation in property values and monthly payments are revised accordingly. See also Alternative Mortgage Instrument.
Barron's Real Estate Dictionary:
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Price Level Adjusted Mortgage - PLAM
A loan whose payment is adjusted according to the rate of inflation. The payments are generally quite low, typically 3 to 5% annually of the debt. This type of mortgage is not commonly used in the U.S.
Example: A price-level-adjusted mortgage is made for $100,000.
Monthly payments in the first year are $400. After the first year, the principal balance is reduced to $98,000. The inflation rate for the year was 10%. The principal balance is adjusted to $107,800 and the payments for the second year are increased to $440 per month.
Example: A price-level-adjusted mortgage is made for $100,000.
Monthly payments in the first year are $400. After the first year, the principal balance is reduced to $98,000. The inflation rate for the year was 10%. The principal balance is adjusted to $107,800 and the payments for the second year are increased to $440 per month.
| Price Fixing, Price | |
| Pride of Ownership, Primary Lease |
Investopedia Financial Dictionary:
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Price Level Adjusted Mortgage - PLAM
A special type of graduated-payment mortgage that adjusts for inflation. The interest rate of a price level adjusted mortgage (PLAM) does not change, but the outstanding principal is changed periodically based on the inflation rate. These adjustments are made based on the movements of an appropriate price index, such as the Consumer Price Index (CPI).
Investopedia Says:
The unpaid principal of a PLAM is adjusted periodically, based upon the rate of inflation or deflation. The payments are then revised based on the new outstanding principal. These adjustments are made at intervals agreed upon by the borrower and lender. This type of mortgage allows the lender to be paid back principal and interest plus an amount to cover inflation.
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Barron's Banking Dictionary
Dictionary of Banking Terms. Copyright © 2006 by Barron's Educational Series, Inc. All rights reserved.
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Barron's Real Estate Dictionary
Dictionary of Real Estate Terms. Copyright © 2008 by Barron's Educational Series, Inc. All rights reserved.
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