A balloon mortgage is best described as a loan that:
Correct Answer
B) Requires regular periodic payments followed by one large final payment that retires the remaining principal balance
A balloon mortgage features regular periodic payments — which may be fully amortizing, partially amortizing, or interest-only — followed by one large lump-sum payment (the 'balloon') due at the end of the loan term. This final payment retires the remaining principal balance in full. Balloon loans are often used by borrowers who expect to sell or refinance before the balloon payment comes due. Lenders and borrowers in Mississippi should be aware that if the borrower cannot pay or refinance at maturity, foreclosure may result.
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