Which mortgage type is often used for short-term financing?

Which mortgage type is often used for short-term financing?

• A. Conventional mortgage
• B. Balloon mortgage
• C. FHA mortgage
• D. Jumbo mortgage

Answer: (B)

A balloon mortgage is often used for short-term financing due to its structure. This type of mortgage typically involves lower monthly payments over a shorter term, often around 5 to 7 years, followed by a large final payment (the "balloon") that represents the remaining balance of the loan. This arrangement makes balloon mortgages appealing for borrowers who plan to sell or refinance before the balloon payment comes due. In contrast, conventional mortgages, FHA mortgages, and jumbo mortgages generally have longer terms, typically ranging from 15 to 30 years. These types of mortgages are designed for standard home-buying scenarios and are not specifically tailored for short-term financial needs like the balloon mortgage is. Hence, for those looking for financing options that are intended to be paid off in a shorter time frame, the use of a balloon mortgage is more suitable.

A balloon mortgage is often used for short-term financing due to its structure. This type of mortgage typically involves lower monthly payments over a shorter term, often around 5 to 7 years, followed by a large final payment (the "balloon") that represents the remaining balance of the loan. This arrangement makes balloon mortgages appealing for borrowers who plan to sell or refinance before the balloon payment comes due.

In contrast, conventional mortgages, FHA mortgages, and jumbo mortgages generally have longer terms, typically ranging from 15 to 30 years. These types of mortgages are designed for standard home-buying scenarios and are not specifically tailored for short-term financial needs like the balloon mortgage is. Hence, for those looking for financing options that are intended to be paid off in a shorter time frame, the use of a balloon mortgage is more suitable.