FHA Graduated Payment Mortgage Calculator
Estimate the first payment, final payment, peak balance, and interest cost for an FHA-style graduated payment mortgage. The schedule shows when the balance rises before the higher later payments catch up.
Initial monthly principal and interest$1,999.52
- Final level monthly payment
- $2,262.27
- Standard fixed-payment mortgage payment
- $2,201.29
- First-year monthly savings
- $201.78
- Peak loan balance
- $300,006.03
- Peak balance increase
- 0%
- Month of peak balance
- 1 year
- Negative-amortization duration
- 1 year
- Total interest
- $504,801.74
- Extra interest versus standard mortgage
- $12,336.00
Year-by-year amortization schedule
| Year | Monthly payment | Annual interest | Principal change | Ending balance |
|---|---|---|---|---|
| 1 | $1,999.52 | $24,000.22 | -$6.03 | $300,006.03 |
| 2 | $2,049.50 | $23,978.23 | $615.81 | $299,390.22 |
| 3 | $2,100.74 | $23,904.06 | $1,304.83 | $298,085.40 |
| 4 | $2,153.26 | $23,772.13 | $2,066.98 | $296,018.42 |
| 5 | $2,207.09 | $23,576.36 | $2,908.73 | $293,109.68 |
| 6 | $2,262.27 | $23,310.11 | $3,837.11 | $289,272.57 |
| 7 | $2,262.27 | $22,991.63 | $4,155.59 | $285,116.98 |
| 8 | $2,262.27 | $22,646.72 | $4,500.50 | $280,616.48 |
| 9 | $2,262.27 | $22,273.18 | $4,874.04 | $275,742.44 |
| 10 | $2,262.27 | $21,868.63 | $5,278.58 | $270,463.86 |
| 11 | $2,262.27 | $21,430.51 | $5,716.70 | $264,747.15 |
| 12 | $2,262.27 | $20,956.03 | $6,191.19 | $258,555.97 |
| 13 | $2,262.27 | $20,442.16 | $6,705.05 | $251,850.91 |
| 14 | $2,262.27 | $19,885.65 | $7,261.57 | $244,589.35 |
| 15 | $2,262.27 | $19,282.94 | $7,864.28 | $236,725.07 |
| 16 | $2,262.27 | $18,630.21 | $8,517.01 | $228,208.07 |
| 17 | $2,262.27 | $17,923.30 | $9,223.91 | $218,984.15 |
| 18 | $2,262.27 | $17,157.72 | $9,989.49 | $208,994.66 |
| 19 | $2,262.27 | $16,328.60 | $10,818.62 | $198,176.04 |
| 20 | $2,262.27 | $15,430.66 | $11,716.56 | $186,459.49 |
| 21 | $2,262.27 | $14,458.19 | $12,689.02 | $173,770.46 |
| 22 | $2,262.27 | $13,405.01 | $13,742.21 | $160,028.25 |
| 23 | $2,262.27 | $12,264.41 | $14,882.80 | $145,145.45 |
| 24 | $2,262.27 | $11,029.15 | $16,118.07 | $129,027.38 |
| 25 | $2,262.27 | $9,691.36 | $17,455.86 | $111,571.52 |
| 26 | $2,262.27 | $8,242.53 | $18,904.69 | $92,666.83 |
| 27 | $2,262.27 | $6,673.45 | $20,473.77 | $72,193.06 |
| 28 | $2,262.27 | $4,974.14 | $22,173.08 | $50,019.98 |
| 29 | $2,262.27 | $3,133.78 | $24,013.44 | $26,006.54 |
| 30 | $2,262.27 | $1,140.68 | $26,006.54 | $0.00 |
Plan I: payments increase 2.5% each year for 5 years, then remain level.
Principal and interest only; FHA mortgage insurance, taxes, insurance, fees, and servicing rules are not included.
How to use this calculator
- Enter the original loan amount before financed mortgage insurance or other charges.
- Enter the fixed note rate and loan term.
- Choose one of the HUD Section 245 payment plans or use a custom annual increase.
- Compare the initial payment, peak balance, and extra interest with a standard fixed-payment mortgage.
How the graduated payment is calculated
An FHA Section 245 graduated payment mortgage starts with a lower principal-and-interest payment and raises it once per year for a set number of years. HUD published five patterns: Plans I, II, and III rise for five years, while Plans IV and V rise for ten years. After the last scheduled increase, the payment stays level for the rest of the term.
The initial payment is not guessed from a normal mortgage payment. It is solved as the payment that makes the present value of the whole graduated payment stream equal the original loan amount:
A = L / sum((1 + g)^e_m / (1 + r)^m)
- L is the original loan amount.
- r is the monthly note rate, or the annual rate divided by 12.
- g is the annual payment increase.
- e_m is the number of annual increases that apply to month m, capped at the plan's graduation period.
The calculator then runs a month-by-month amortization schedule. Each month's interest equals the prior balance times the monthly rate. If the scheduled payment is below that interest charge, the unpaid interest is added to the loan balance. That is negative amortization. The tool records the first month with the highest balance, the number of negative-amortization months, and the added interest compared with a standard fixed-payment mortgage for the same amount, rate, and term.
What moves the result most
The annual increase and graduation period control how much payment is shifted from the early years into later years. A higher increase lowers the first payment more, but it usually raises the peak balance and lifetime interest. The note rate matters twice: it sets the discount rate used to solve the first payment and it controls how quickly unpaid interest accumulates when the early payment is too low.
What the calculator leaves out
The results are scheduled principal and interest only. FHA mortgage insurance, property taxes, homeowners insurance, HOA dues, closing costs, lender overlays, program availability, and servicing-system rounding are outside the model. Custom plans use the same graduated-annuity math, but they should not be treated as HUD-approved Section 245 plans.
Worked example
For a $300,000 loan at 8% for 30 years under HUD Plan I, the first-year payment is about $1,999.52 per month. HUD's Appendix 1 table gives a Plan I factor of 6.6651 per $1,000 at 8%, which is $1,999.53 for a $300,000 loan after table rounding.
The payment rises 2.5% each year for five annual increases and then stays near $2,262.27. A standard 30-year fixed payment on the same loan is about $2,201.29, so the first-year savings are about $201.78 per month. In this scenario the balance peaks near $300,006 in month 12, negative amortization lasts 12 months, and total interest is about $504,802, roughly $12,336 more than the standard fixed-payment loan.
Common questions
What is an FHA Section 245 graduated payment mortgage?
Section 245 is an FHA graduated payment mortgage structure with lower scheduled payments at the start and higher payments later. The idea is to fit borrowers whose income is expected to rise, but the lower early payments can create negative amortization.
What are HUD Plans I through V?
HUD published five payment patterns for Section 245 loans. Plans I, II, and III increase payments for five years at 2.5%, 5%, and 7.5% per year. Plans IV and V increase payments for ten years at 2% and 3% per year.
Why can the balance rise even when every payment is made?
The balance rises when a scheduled payment is less than that month's interest charge. The unpaid interest is added to principal, so the loan balance grows until the graduated payment becomes large enough to cover interest and reduce principal.
How much more interest does a GPM cost than a standard mortgage?
The extra interest is the graduated plan's total interest minus the total interest on a level-payment loan with the same amount, rate, and term. A GPM usually costs more because principal is paid down more slowly in the early years.
Does the payment include FHA mortgage insurance, taxes, or homeowners insurance?
No. The calculator shows scheduled principal and interest only. FHA mortgage insurance premiums, escrow items, closing costs, and servicing fees must be added separately when estimating the full monthly housing payment.