An Introduction to Growing Equity Mortgage Loans :

 Growing equity mortgage loans, also known as the rapid payoff mortgage, involves a trade-off between greater equity in a home and larger monthly payments. With this type of mortgage loan, the amount needed for monthly payments rise relatively quickly. While the interest rates themselves are fixed, the monthly payments rise every year for a predetermined number of years, and perhaps even the entire duration of the loan.

Usually, increases in the mortgage loan monthly payments are either pegged to an index or related to a fixed schedule. Common indexes that can be used are the three month and six month T-bill rates. As for fixed schedules, these are mostly arbitrary, but they will generally bear some relation to current market conditions.
The interest rate that growing equity mortgage loans are normally a few percentage points lower than the average mortgage loan. This is because lenders expect to be repaid faster. Unlike in loans that involve negative amortization, the increased monthly payments in growing equity mortgage loans are all applied to the principal. In effect, you will be paying off your debt in a much shorter time.

    The only problem that you will encounter with a growing equity mortgage loan is the risk that you might not be able to meet the rising monthly payments. If your income does not rise in proportion to the increase of the payments, you might have some difficulty. Otherwise, this is a good type of mortgage loan get involved in.

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