A significant feature of high-cost home loans is related to what payment structure?

A significant feature of high-cost home loans is often associated with balloon payments. Balloon payments refer to a structure where a borrower makes smaller monthly payments for a certain period, often at a lower interest rate, followed by a much larger payment at the end of the loan term. This payment structure can be appealing to some borrowers initially due to lower upfront costs but carries substantial risk because the large final payment can create financial strain if the borrower is unprepared for it or unable to refinance at the time.

Understanding the implications of balloon payments is crucial because they can lead to scenarios where the borrower may face foreclosure if they cannot meet that large payment. This feature is particularly significant in high-cost home loans, which can exacerbate financial vulnerabilities among borrowers. Recognizing this aspect of loan payment structures is essential for anyone studying or working in mortgage law, especially concerning borrowers' rights and protections under specific lending regulations.