Graduated Payment Mortgage Note

$---------- [date]

1. Parties. This Note is for value received by [names] of [address] (Borrowers), from [bank], a [state] banking institution with principal place of business at [address] (Bank).

2. Promise to Pay and Obligation. Borrowers jointly and severally promise to pay the principal sum of ---------- dollars ($----------), plus interest, to the order of Bank, or Bank's assigns, at Bank's principal place of business, or any other place as the holder of this Note may state in writing. The amount due to Bank will be paid by Borrowers on or before [date]. This amount due consists of the principal of ---------- dollars ($----------), plus interest, from [date], on the balance of the principal that remains unpaid.

3. Interest Rate. The rate of interest payable on the unpaid principal is ---------- percent (----------%) per annum.

4. Payment Terms.

a. Initial Monthly Payment. The monthly payment payable by Borrowers during the first year(s) of this Note is ---------- dollars ($----------), beginning [date], and monthly thereafter.

b. Increase in Monthly Payment. The monthly payment payable by Borrowers during the [number] through the [number] year(s) of this Note is ---------- dollars ($----------), beginning [date] and monthly thereafter [repeat subsection (b) to accommodate the applicable number of periodic increases in monthly payments].

c. Fully Amortizing Payments. The monthly payment payable by Borrowers from and after [date] is ---------- dollars ($----------) (being the monthly sum necessary to fully pay all unpaid principal, accrued interest, and interest on the unpaid principal at the rate provided in Paragraph 3 above, in the remaining term of this Note).

5. Application of Paid Installments. Borrowers' monthly payments will be applied first to the current month's interest payable on the unpaid balance, then to accrued interest, and then to amortization of the principal. If any monthly payment is less than the interest earned during that month, the unpaid interest shall be carried as an obligation of Borrowers (so-called accrued interest).

6. No Interest on Interest. Accrued interest accumulated during the term of this Note will not be subject to any additional interest charges, it being understood that there will be no interest charged on interest.

7. Prepayment. Borrowers may, at any time during the term of this Note, prepay all or part of the principal and/or accrued interest without penalty.

8. Late Payments.

a. Interest on Default. If any part of the principal or interest remains unpaid after maturity, or after any default under this Note that remains incurred, the interest rate on the principal remaining unpaid will be the interest rate stated in Paragraph 3, plus ---------- percent (----------%) per year.

b. Overdue Installments. When payment of any installment is more than [number] days late, Bank may charge a late charge of ---------- percent (----------%) for each dollar overdue. This late charge may not be greater than the maximum allowed by state statute to Bank (for defraying handling expenses of late payments).

9. Security. This Note is secured by a mortgage, dated [date], which has been executed, acknowledged, and delivered to Bank by Borrowers.

10. Remedies on Default. If Borrowers fail to (a) pay the principal or interest or any installment due on this Note; or (b) comply with the terms, conditions, or provisions of the mortgage securing this Note; or (c) comply with the terms, conditions, or provisions of any other agreement entered into by Borrowers with Bank, all unpaid indebtedness of Borrowers will become immediately due and collectible at the option of Bank. If Bank delays in exercising this option, that delay will not operate as a waiver or prevent its exercise during the period of the existing or any later default.

11. Waiver of Notice and Presentment. The makers and endorsers of this Note severally waive presentment for payment, protest, notice of protest, and notice of nonpayment of this Note.