Finance
In New York, a 'balloon mortgage' typically:
AHas monthly payments that gradually increase over the loan term
BRequires payments based on a long amortization schedule, but the entire remaining balance becomes due at the end of a shorter term (e.g., 5 or 7 years)✓ Correct
CHas no fixed maturity date
DRequires no down payment
Explanation
A balloon mortgage has lower monthly payments (often calculated based on a 30-year amortization) but requires a large 'balloon' payment of the entire remaining balance at the end of a shorter term — typically 5, 7, or 10 years. Balloon mortgages are common in commercial lending in New York and expose borrowers to refinancing risk at maturity.
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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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