SOFA-CFE · Question #102
Some mortgages provide for a lump sum payment of part of the principal upon maturity; this lump sum is known as:
The correct answer is B. balloon payment. Balloon payment (B) is the correct term for a lump sum due at the end of a mortgage's term, representing the remaining principal balance after years of smaller, regular payments. The loan "balloons" at maturity because the periodic payments were not large enough to fully…
Question
Some mortgages provide for a lump sum payment of part of the principal upon maturity; this lump sum is known as:
Options
- Aheap payment
- Bballoon payment
- Cmass payment
- Dcollective payment
How the community answered
(32 responses)- A6% (2)
- B78% (25)
- C13% (4)
- D3% (1)
Explanation
Balloon payment (B) is the correct term for a lump sum due at the end of a mortgage's term, representing the remaining principal balance after years of smaller, regular payments. The loan "balloons" at maturity because the periodic payments were not large enough to fully amortize the debt.
Options A, C, and D (heap, mass, and collective payment) are simply invented distractors with no meaning in mortgage or financial terminology - they do not exist as defined concepts in lending.
Memory tip: Picture a balloon inflating over the life of the loan - it grows quietly while you make small payments, then suddenly "pops" (comes due) at maturity as one large sum. The visual of a balloon expanding then releasing all at once maps directly to how these loans work.
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