type of Graduated Payment Mortgage where principal and interest payments are supplemented by payments from a special savings account. Funds are drawn from the pledged account, acting as additional collateral, during the early years of the loan.
a type of home purchase loan under which a sum of cash contributed by the owner is set aside in an account pledged to the lender. The account is drawn down during the initial years of the loan to supplement periodic mortgage payments. The effect is to reduce the payment amounts in early years. Compare with collateral.
Example: Abel obtains a pledged account mortgage. The loan principal is $40,000 and Abel makes a down payment of $10,000. $5,000 of this amount is put in a pledged account. Abel makes payments based on a mortgage principal of $45,000 but the payments are reduced in the first 3 years by drawing upon the $5,000 pledged account.
