What is the name of the mortgage where payments increase as the borrower's ability to pay grows?

A graduated payment mortgage is specifically designed to accommodate a borrower's increasing financial capacity over time. This type of mortgage starts with lower initial monthly payments that gradually rise at predetermined intervals. The rationale behind this structure is to assist borrowers who anticipate an improvement in their income in the future, allowing them to manage their payments more easily in the initial years of the loan.

This type of mortgage is particularly beneficial for first-time homebuyers or those entering the housing market who may currently have limited income but expect their earnings to increase due to career advancements or other factors. As their financial situation improves, they can comfortably handle the increasing payments that come with the graduated payment schedule.

In contrast, adjustable-rate mortgages involve interest rates that fluctuate based on market conditions, and while they can sometimes start lower, they do not include the structured increase tied to the borrower's future earning potential. A balloon mortgage typically features lower initial payments that culminate in a large final payment due at maturity, which does not align with the concept of gradually increasing payments. A standard mortgage usually implies fixed payments over the term of the loan, with no planned increases based on the borrower’s situation.