Finance
A balloon mortgage in Arizona is characterized by:
AIncreasing monthly payments over the loan term
BA large lump-sum payment due at the end of the loan term✓ Correct
CMonthly payments that never include principal reduction
DInterest that adjusts monthly based on market rates
Explanation
A balloon mortgage has regular monthly payments, usually based on a 30-year amortization, but requires the remaining balance to be paid in full at the end of the term — typically 5 to 7 years.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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