Question

How are balloon payment mortgages different from traditional mortgages? Check all that apply.
1. The term is shorter than for traditional mortgages.
2. Unlike traditional mortgages, the borrower pays no interest.
3. A large payment is due at the end of the term.
4. Balloon mortgages are not issued by banks.
5. Balloon mortgages are more commonly used by home buyers than traditional mortgages.

Answer 1

The answer is:

1. The term is shorter than for traditional mortgages.

3. A large payment is due at the end of the term.

in balloon payment mortgages, the buyers would had to pay considerably small amount before the mortgage is due.  At the end of the term, the amount of mortgage is fully amortized and leave a huge sum for the final payment.  (just like a balloon that start small and keep getting bigger as it pumped). This type of mortgage is very common in commercial properties.

Answer 2

There are a lot of ways to pay mortgages. The  balloon payment mortgages is known to be quite different from traditional mortgages because;

• The term is shorter than for traditional mortgages.
• Unlike traditional mortgages, the borrower pays no interest.
• A large payment is due at the end of the term.

Balloon mortgage

A balloon mortgage is one that a person do not need to fully amortize over the life of the loan.

With the use of traditional mortgage, the borrower often produce monthly payments that is made up of principal and interest over a fixed period of time but it is quite different with balloon type.

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