Finance
What is a 'balloon mortgage' and what risk does it pose to Delaware borrowers?
AA mortgage with unusually high monthly payments; risk is unaffordability
BA mortgage with regular monthly payments followed by a large lump-sum payment of the remaining balance at a specified date; risk is the borrower may not be able to refinance or pay the balloon✓ Correct
CA mortgage that adjusts with inflation; risk is unpredictable payments
DA mortgage requiring a large down payment; risk is illiquidity
Explanation
A balloon mortgage has regular (often interest-only or amortizing) payments, but the entire remaining loan balance becomes due in a lump sum at the end of a short term (typically 5–7 years). The risk is that the borrower may be unable to refinance or repay the balloon payment, potentially leading to default.
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