California Real Estate Practice Exam

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A purchaser borrows $275,000 to purchase a property for a term of ten years. At the end of that time, what is the payment of $175,000 called?

Final installment
Down payment
Balloon payment
Adjustable payment

The correct answer is: Balloon payment

The payment of $175,000 at the end of the ten years is called a balloon payment. This type of payment is a larger, lump sum payment that is made at the end of a loan term. It is different from a final installment or down payment because those payments are made throughout the loan term, while a balloon payment is only made at the end. An adjustable payment is one that can change throughout the loan term, while a balloon payment is a fixed amount.