Finance
A 'balloon payment' mortgage is one in which:
AMonthly payments increase gradually over the life of the loan
BThe loan is fully amortized over 30 years with equal monthly payments
CRegular payments are made for a set period, with the remaining balance due in a large lump sum at term end✓ Correct
DInterest is charged only on the outstanding balance each month
Explanation
A balloon mortgage has regular (often interest-only or partially amortizing) payments for a period (e.g., 5-7 years), then the entire remaining balance is due at once. Borrowers must refinance or pay off the balloon, creating refinancing risk.
Related California Finance Questions
- What is the loan-to-value (LTV) ratio if a buyer purchases a $400,000 home with a $60,000 down payment?
- Under California's anti-deficiency statutes, which type of loan is protected from a deficiency judgment after non-judicial foreclosure?
- What is a 'short sale'?
- The maximum conforming loan limit set by the FHFA determines:
- What is amortization in a mortgage?
- Under Regulation Z (Truth in Lending Act), if a lender advertises a specific monthly payment, they must also disclose:
- The annual percentage rate (APR) on a loan differs from the interest rate because it includes:
- The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating based on all of the following EXCEPT:
Practice More California Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free California Quiz →