Question

sample terms
loan amount: $200,000
regular payment term: 7 years
fixed rate interest: 4.0%

component	cost
monthly interest rate	.333%
monthly payment	$954
total interest paid	$52,286
total principal paid	$26,296
remaining payment	$173,073

according to the terms of the sample balloon payment mortgage, what will most likely occur at the end of the regular payment term?
○ the remaining principal of $173,073 will be due immediately
○ the interest rate will change to decrease the monthly payment
○ the loan’s terms have all been met and it is paid in full
○ the monthly payments will increase due to an increase in principal

Explanation:

A balloon payment mortgage has smaller regular payments (covering interest and some principal) during the term, with the remaining principal due as a "balloon" payment at the end of the regular term. From the table, the remaining payment is $173,073 (remaining principal). The other options are incorrect: the interest rate is fixed (so it won't change to decrease payments), the loan isn't paid in full (since there's a remaining payment), and the principal isn't increasing (monthly payments pay down some principal, so remaining is what's left, not an increase).

Answer:

A. the remaining principal of $173,073 will be due immediately