Question

A mortgage in which you pay a fixed monthly payment for a specified number of years and then make a final large repayment of the principal is called a/an:__________.

Answer 1

Balloon mortgage

Step-by-step explanation:

The balloon mortgage type requires the borrower to repay the mortgage loan in lumpsum at the end of a specified period. These mortgage types are mostly short term, but maybe long-term in some instances. In balloon mortgage, the borrower may be required to be repaying interest only over the life of the mortgage. At maturity, the principal amount is repaid in a lump sum.

Balloon mortgage poses a great risk to lenders. Some lenders may charge a high-interest charge rate to cover for the risk. Balloon loans are suited to commercial construction firms. They come to develop houses and repay in a lump sum when they make sales.