Interest-OnlyLexicon: Interest-OnlyA loan structure where payments cover purely interest expenses for an agreed phase, maintaining the principal balance completely untouched.Non-Amortizing Flow EquationInstallment_IO = Principal * iView in Full Glossary → payments maintain original capital completely untouched for an agreed initial phase before full re-amortization takes place.
Operational Example
A $600k mortgage at 6% with 10 years IO stays at $3,000/mo before jump-climbing to $4,298/mo in month 121.
Graduated PaymentsLexicon: Graduated PaymentsA loan structure where installments start lower and increase gradually over early years by a fixed index before leveling out.Escalator Progression IdentityInstallment[Year t] = Base_Installment * (1 + g)^(t-1)View in Full Glossary → begin under-market, escalating systematically before stabilizing. Ideal for career trajectories with solid salary growth forecasts.
Operational Example
An early career mortgage starting at $1,200/mo, increasing by 7.5% annually for 5 years before reaching $1,722/mo.
Balloon PaymentLexicon: Balloon PaymentA large, lump-sum payment due at the end of a loan term after a period of smaller installments, typically when the amortization timeline is longer than the actual maturity timeline.Remaining Amortization Liability LawB = P0*(1+i)^k - M*[((1+i)^k - 1) / i]View in Full Glossary → amortization schedules assume long limits, but actual loan terms expire fast, demanding massive single lump repayments at exit.
Operational Example
A $1M note amortized over 25 years with payments of $7,067 but requiring a terminal lump-sum balloon of $815,000 at year 10.