Finance
In Arizona, a 'balloon payment' mortgage requires the borrower to:
AMake larger payments at the beginning of the loan term and smaller payments at the end
BMake regular periodic payments with a large lump-sum payment of the remaining balance due at the end of the loan term (before the loan would be fully amortized)✓ Correct
CPay the entire loan balance within 5 years regardless of the original term
DMake interest-only payments throughout the entire loan term
Explanation
A balloon mortgage has a shorter term than its amortization schedule—for example, monthly payments calculated on a 30-year amortization but with the full remaining balance due in 7 years. At the balloon date, the borrower must pay off the balance (through sale, refinance, or cash). This creates interest rate and refinancing risk.
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