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00-3 of this Title contains the provisions for evaluating each of these instruments and the treatment of principal and interest when determining income and resource eligibility. B. The use of loans to borrow or lend assets during the Medicaid LTSS application look-back period, or on or after the date eligibility is established, is evaluated to determine whether a disqualifying transfer exists. Treatment is as follows: 1. Disqualifying transfer – The use of a loan to transfer assets on or after February 8, 2006 may be a disqualifying transfer if the transaction is for less than fair market value and in amount that cannot be reasonably paid back within the expected lifetime of the applicant or beneficiary or the non- LTSS spouse. Commercial and informal loans that do not meet the criteria set forth in Part 40-00-3 of this Title are treated as gifts and, therefore, as disqualifying transfers except as provided herein under § 6.6(B) of this Part. Mortgages made for less than fair market value are disqualifying transfers for Medicaid LTSS eligibility purposes. The penalty period for disqualifying transfers made using a loan is the total uncompensated value of the transfer including principal and interest amortized over the repayment period. 2. Allowed transfer – Use of one of these financial instruments is considered an exempt transfer when the loan agreement states the total amount of the debt, including principal and interest amortized over the life of the loan, and: a. Actuarily sound. The repayment terms are actuarially sound, as determined in accordance with actuarial publications of the Office of the Chief Actuary of the Social Security Administration; b. Equal payments. The debt payments are made in equal amounts during the full term of the loan, with no deferral or balloon payments of principal or interest; c. Limits. The cancellation of the balance upon the death of the lender is prohibited. 3. Prepayment – Early payment of a debt incurred as an allowed asset transfer under § 6.8(B)(2) of this Part is subject to review by the State for a disqualifying transfer if it is the result of making higher, multiple, or unequal payments of principal and/or interest or otherwise violates the criteria therein. Unequal payments are only permitted when they are required under the terms of commercial loan that has variable interest rates.