Which loan type has a fixed interest rate but increases principal payments over time?

A growing equity loan is designed with a fixed interest rate, which remains constant throughout the life of the loan. What sets it apart is the structure of the repayment. In a growing equity loan, the borrower’s monthly payments increase over time, specifically the portion that goes toward the principal. This gradual increase in payments allows borrowers to pay off their mortgage more quickly, benefiting from increased equity in the property as principal payments rise.

The growing equity loan is particularly advantageous for borrowers who expect their income to increase over time. As they earn more, they can manage the higher payments effectively, which accelerates their ability to build equity in their home.

In contrast, other types of loans like straight loans typically focus on interest-only payments for a certain period without increasing principal repayments. Conventional loans, while they may have fixed interest rates, usually do not have the incremental principal payment increases characteristic of a growing equity loan. Purchase money mortgages refer specifically to loans taken out to buy a property and may not have the same structure for changing principal payments as a growing equity loan does.