Finance
What is a 'balloon mortgage' in Rhode Island real estate finance?
AA mortgage with monthly payments that increase each year
BA loan with relatively small periodic payments and a large lump-sum payment due at the end of the term✓ Correct
CA mortgage where the interest rate adjusts annually
DA government-backed loan with reduced closing costs
Explanation
A balloon mortgage features smaller periodic (often interest-only or partially amortized) payments with a large 'balloon' lump-sum payment of the remaining balance due at the end of the loan term.
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Key Terms to Know
Closing Costs
Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
AmortizationThe 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.
Math Concepts
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