Which type of mortgage loan does not fully amortize due to its repayment terms?

Balloon mortgages are characterized by their repayment structure, in which the loan is not fully amortized throughout the term of the loan. This means that after a set period, typically shorter than the standard fixed loan term, the borrower must pay off the remaining balance, often in a lump sum. This structure results in lower monthly payments compared to fully amortized loans, but can lead to a significant financial burden at the end of the term if the borrower is not prepared for the balloon payment.

In contrast to balloon mortgages, conventional loans, fixed-rate mortgages, and interest-only loans operate under different amortization terms. Conventional loans can be fully amortized, repaired within a specified timeframe. Fixed-rate mortgages also tend to be fully amortized over their terms, offering predictable monthly payments until the loan is paid off. Interest-only loans allow borrowers to pay only the interest for a set period, but the principal balance remains due at the end of the term, typically leading to a large payment later on. However, this is still a different structure from the balloon mortgage, where a defined lump sum is required at a specific time.

Therefore, the structure of balloon mortgages clearly illustrates their non-amortizing nature, making this option the correct choice in identifying which mortgage loan type