Finance
What is a 'balloon payment' mortgage and what risk does it pose to Illinois borrowers?
AA mortgage with extra monthly payments; poses no special risk
BA mortgage where a large lump sum payment is due at the end of a short term, risking default if refinancing is unavailable✓ Correct
CA mortgage that grows over time; the most common type in Illinois
DA government-backed mortgage requiring no down payment
Explanation
A balloon payment mortgage features relatively low periodic payments but requires a large lump sum payment at the end of a short term (typically 5-7 years). The risk is that if market conditions change and refinancing is unavailable or rates are much higher, the borrower may be unable to make the balloon payment and could face foreclosure.
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