What type of mortgage allows the remaining balance to be paid at the end of a specified term?

A balloon mortgage is designed in such a way that it requires the borrower to make smaller periodic payments over the life of the loan, with a significant remaining balance due at the end of the term. This type of mortgage typically involves lower monthly payments initially since they are often calculated based on a longer amortization period despite having a shorter loan term. At the end of the specified term, the borrower must pay the entire remaining balance in a single lump sum, which is known as the "balloon payment."

This structure is appealing for certain borrowers who may be planning to sell the property or refinance before the balloon payment comes due. Borrowers must be cautious with balloon mortgages as they can lead to financial strain if they are unprepared for the larger payment required at the end.

Other types of mortgages, such as fixed-rate mortgages, involve consistent monthly payments over the life of the loan until it is fully paid off, while short-term mortgages typically feature a shorter repayment period but do not have a large final payment. Conventional mortgages refer broadly to loans that adhere to certain guidelines set by the government or private lenders, which may or may not include balloon payment structures. Thus, the balloon mortgage is specialized for its particular repayment method of a significant balance due at the conclusion