What does a growing-equity mortgage allow?

A growing-equity mortgage is designed to provide homeowners with an increasing payment structure over the term of the loan, which is reflected in the correct answer. This type of mortgage allows for periodic payment increases that help the homeowner pay off the principal balance more quickly than through a standard fixed-rate mortgage.

The increasing payments are typically predetermined and occur at regular intervals, which means that while the initial payments may be lower, they rise incrementally over time. This structure not only reduces the interest paid over the life of the loan but also accelerates equity buildup in the property, allowing homeowners to reach full ownership sooner.

In contrast, other options do not align with the characteristics of a growing-equity mortgage. For instance, a fixed payment for the life of the loan does not provide the increasing payment feature that defines this type of mortgage. Similarly, lower initial payments with balloons would indicate that larger payments are due at specific points rather than the gradual increase characteristic of growing-equity mortgages. Finally, payments that decrease annually could attract borrowers looking for reducing debt but do not align with the goal of a growing-equity mortgage, which aims for increasing payments. Thus, the main feature of a growing-equity mortgage is indeed the payment increases to shorten the repayment term.