What characterizes a partially amortized mortgage?

A partially amortized mortgage is characterized by a schedule of payments that includes both interest and a portion of the principal, but has a shorter maturity compared to the amortization period. This means that while the borrower is making payments, they are not fully paying off the mortgage by the end of the term. Instead, when the term ends, there is often a remaining balance, known as a "balloon payment," that must be paid off in a lump sum. This setup allows for lower monthly payments compared to a fully amortized mortgage, which would require the balance to be paid off by the end of the stipulated term.

In contrast, a mortgage that includes only interest for a long term (which some might confuse with a partially amortized mortgage) does not reduce the principal at all during the term and requires a full repayment of the principal at the end. Other options that suggest low interest rates or that no repayment is required until the end of the term do not accurately describe the nature of a partially amortized mortgage. The key aspect here is the combination of payments reducing the principal, albeit not fully, alongside a shorter overall maturity.