What is the primary characteristic of a traditional fixed-rate mortgage?

Understanding Mortgages and Balloon Payments

Interactive Video
•
Business, Mathematics, Life Skills
•
9th - 12th Grade
•
Hard

Lucas Foster
FREE Resource
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10 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Variable monthly payments
Fixed monthly payments
Balloon payments at the end
Interest-only payments
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
In a traditional 30-year fixed mortgage, how does the composition of interest and principal change over time?
Interest decreases, principal increases
Both interest and principal remain constant
Interest and principal both increase
Interest increases, principal decreases
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is a key difference between a balloon payment loan and a traditional mortgage?
Balloon loans are only available for commercial properties
Balloon loans require no monthly payments
Balloon loans have a shorter term than their amortization period
Balloon loans have a fixed interest rate
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
At the end of a balloon payment loan term, what is typically required?
Continue making monthly payments
No further action is needed
Refinance the loan automatically
Pay off the remaining principal balance
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Why might a bank prefer a balloon payment loan over a traditional fixed-rate mortgage?
It reduces the bank's interest rate risk over the long term
It allows the bank to take on more interest rate risk
It guarantees a higher interest rate for the bank
It requires no down payment from the borrower
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
How does a balloon payment loan compare to an adjustable-rate mortgage in terms of interest rate risk?
Balloon loans eliminate interest rate risk
Balloon loans share risk between borrower and bank
Balloon loans transfer all risk to the bank
Balloon loans transfer all risk to the borrower
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is a potential advantage for a borrower choosing a balloon payment loan?
Lower interest rate compared to a 30-year mortgage
Higher monthly payments
Guaranteed loan approval
No need to pay off the loan
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