‘Central Mortgage and
.Housing Corporation, ‘the
Crown Corporation in which
_, all citizen tax payers are
~ Shareholders, introduced a
“new Graduated Payment
Mortgage program in June,

1978. ;
“The GPM Program, which
“was applied only to moder-
‘ately-priced homes. in the
Same range of AHOP price
limits, was designed to
Provide purchasers with a
~flexible mortgage option that
‘could be good for some
people under certain circum-
stances,

Under GPM, taking the
example of a $35,000 mort-
Sage with a 25-year amor-
Uzation period and an inter-
est rate of 10% per cent, the
borrower's payments could
be reduced by $2.25 per
$1,000 for a net monthly
Payment in the first year of
$240 instead of $319 each

under th

month throughout the life of
the mortgage.

‘Monthly payments would
rise under the GPM plan to
$373 in the tenth year, and
then remain constant at $382
for the remaining 15 years of
the life of the mortgage.

Major lenders have so far
been extremely luke-warm to
the concept of Graduated
Payment Mortgages, citing
concern over the build-up of
debt in the early years of the
mortgage. But some spokes-
men for banks and _ trust
companies have privately
admitted it is just a matter of
time before the option is
offered by most lenders.

While most major sources
have not yet offered GPM’s,
smaller lending organiza-
tions in some areas have
become very active in this
type of mortgage loan.
CMHC, the primary instiga-
tor, has become very active

e Grantham bridge, Seymour Cre

ek passes t

eet

i
loan
to make it available through
major sources.

The Canadian Real Estate
Association is now preparing
a brochure for distribution to
its member real estate
boards across Canada so that
licensed real estate person-
nel: will be able to deal
properly with the application
of GPM’s and guide potential

purchasers in the right
direction.
There is, however, some

care needed in application of
the Graduated Payment
Mortgage to the purchase of
your home. Across Canada,
the AHOP price limited
home is still $47,000 value,
and buyers of this accommo-
dation may be of limited
income at the present time. If
present economic trends
continuc, the — borrower's
income would rise as month-
ly payments rose so that, in

ugh a variety of interesting ic

se

effect, he would be paying no

greater proportion of income
on a percentage basis in the
25th year than in the first
year. In fact, it could be less.

However, in the early
years of the mortgage, the
borrower would not be
making high enough pay-
ments to cover the interest.
Therefore, the outstanding
balance would be = higher
insicad of lower up to the
sixth year, reaching a peak of
$37,434.

Members) of the
Estate Board of Greater
Vancouver still have some
reservations about the wis-

Real

dom of the Graduated
Payment Mortgage Plan,
partly because it is predi-

cated on inflationary trends
and could, indeed encourage
inflationary trends. And
many real estate profession-
als are also aware that the

e configurations on its

path to Burrard

first few years of home
ownership for first-time
buyers are not necessarily
the hardest years.

Usually both partners are
working when the first home
is purchased so two incomes
can be applied to mortgage
payments. In a few years,
when children come along, it
may be necessary for one
Partner to stop working for a
few years, leaving only one
income to cover costs which
at that time could be higher.
And in the Lith year of the
GPM, payments really jump,
and this is the time when the
typical family has reached its
peak in number, perhaps

both parents are back work-
ing, but a greal part of one
partner's income goes for
daycare costs to allow the
second income to be carned.
usually by the Lith year.in a
conventional mortgage, the

ey. &

Inlet.

couple is looking at a smaller
monthly payment than when

the home was first pur-
chased.
For the typical young

couple who want a home for
future children, a very
careful look at the Graduated
Payment Mortgage  pro-
gram is advised. ‘It de-
pends very much on_ the
couple's hopes and plans for
the future, prospects in their
working life, and the security
of their professional or trade
(raining which should deter-
mine whether they wish to
sacrifice more in the earlier
stages of mortgaging while
working towards lower pay-
ments, or get the advantages
of lower payments in the
original purchase, while pro-
mising to pay higher pay-
ments in the future, when
their careers have become
more established.

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