Finance
In West Virginia, a 'balloon mortgage' requires the borrower to:
AMake increasing payments over the life of the loan
BPay off the remaining loan balance in a lump sum at the end of a specified period✓ Correct
CMake interest-only payments for the entire term
DRefinance the loan every 5 years automatically
Explanation
A balloon mortgage requires the borrower to make regular payments for a set period (often 5-7 years), then pay the entire remaining balance in a lump sum (the balloon payment). Balloon mortgages carry refinancing risk if the borrower cannot pay off the balance.
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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.
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