Which type of mortgage involves periodic payments and a final large payment that exceeds the earlier ones?

The type of mortgage that is characterized by making smaller periodic payments followed by a final large payment is known as a balloon mortgage. In this arrangement, the borrower pays interest on the outstanding loan balance for a specified period, typically with periodic payments that do not sufficiently reduce the principal. As a result, the majority of the principal remains at the end of the loan term, culminating in a substantial final payment, or "balloon," that is significantly larger than the previous regular payments.

This structure can be beneficial for borrowers who anticipate a large influx of cash at the end of the term, allowing them to manage lower monthly payments upfront. However, it also presents a risk if the borrower is not prepared for the sizeable payment due at the end of the term.

Adjustable Rate Mortgages, while they involve changing payment amounts due to fluctuating interest rates, do not specifically culminate in a large final payment. Interest-Only Mortgages allow the borrower to pay only the interest for an initial period, potentially leading to a higher final payment when principal starts to be repaid, but this is not in the form of periodic smaller payments leading to a balloon. Fixed-Rate Mortgages have consistent payments throughout the life of the loan, typically not featuring any large end