NMLS Hawaii MLO State Practice Exam 2025 – Complete Test Prep

The term that describes a short-term mortgage that culminates in large end payments is a balloon mortgage. This type of loan typically features lower regular payments during the term, which may be structured as interest-only payments or partial amortization, but then requires a much larger lump-sum payment, known as the "balloon payment," at the end of its term.

Balloon mortgages are advantageous for borrowers who may expect to increase their income or refinance before the due date of the balloon payment, thus making the initial lower payments appealing. However, the risk lies in being unable to make the larger payment at the end, underscoring the importance of planning for future financial circumstances.

In contrast, a fixed-rate mortgage maintains consistent monthly payments throughout the entire loan period, and an amortizing loan gradually pays down the principal balance along with interest, leading to equal payments each month until it is fully paid off. An equity loan, typically referring to a home equity loan or line of credit, allows homeowners to borrow against the equity in their property, which does not fit the description of having large end payments like a balloon mortgage does.