Finance
In Michigan, a 'balloon mortgage' is characterized by:
AA gradually increasing payment schedule
BSmaller monthly payments for a set term followed by a large lump-sum payment of the remaining balance✓ Correct
CA fixed rate and fixed payment for 30 years
DA government-backed mortgage for low-income buyers
Explanation
A balloon mortgage has lower periodic payments (often interest-only or partially amortized) during the loan term, ending with a large 'balloon' payment of the remaining principal balance due all at once.
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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.
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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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