Finance
A 'balloon mortgage' in Massachusetts is characterized by:
AIncreasing monthly payments over time
BA large lump-sum payment due at the end of a relatively short term✓ Correct
CMonthly payments that only cover interest
DA variable rate tied to a benchmark index
Explanation
A balloon mortgage has relatively low monthly payments (often based on a 30-year amortization) but requires a large lump-sum 'balloon' payment at the end of a shorter 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.
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.
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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Math Concepts
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