Finance
What is a 'balloon mortgage' and what risk does it pose to Illinois borrowers?
AA mortgage with increasing monthly payments; risk of unaffordable future payments
BA mortgage with a large lump-sum payment due at the end of a shorter term than a full amortization period; risk of inability to refinance or pay the balloon when due✓ Correct
CA mortgage for unusually large properties; risk of over-borrowing
DAn interest-only mortgage for 30 years; risk of never building equity
Explanation
A balloon mortgage has a shorter maturity than its amortization period. For example, a 30-year amortization with a 7-year balloon means the borrower makes payments as if the loan were for 30 years, but the entire remaining balance is due in full after 7 years.
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