Which type of mortgage results in a larger final payment at the end of the loan term?

The choice of a balloon mortgage results in a larger final payment at the end of the loan term because it is structured to have smaller periodic payments throughout the life of the loan, typically covering only the interest or a portion of the principal. As a result, at the loan's maturity, there is a significant final payment due, which pays off the remaining principal balance in one lump sum. This structure typically appeals to borrowers who may be planning to sell or refinance before reaching that final payment date, as they benefit from lower payments in the earlier years.

In contrast, a fixed-rate mortgage involves consistent, equal payments throughout the loan term, which amortize the loan amount fully by the end. Similarly, a variable mortgage has fluctuating payments based on changes in interest rates, but these also strive to amortize the loan balance over time. A partially amortized mortgage has periodic payments that cover some of the principal balance but not enough to pay off the loan by the end of its term, which may lead to a balance due at the end, though it typically does not reach the magnitude of a balloon payment. Thus, the balloon mortgage is distinctive for its substantial final payment that is not fully amortized throughout the life of the loan.