Finance
A balloon mortgage in Iowa requires the borrower to:
AMake gradually increasing payments over the loan term
BPay a lump sum (balloon payment) of the remaining principal at the end of a specified term✓ Correct
CPay only interest with no principal reduction
DMake bi-weekly payments to reduce the loan term
Explanation
A balloon mortgage has regular monthly payments based on a longer amortization schedule, but the entire remaining balance becomes due as a single lump sum (balloon payment) at the end of a shorter specified term (e.g.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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