What type of mortgage requires the borrower to make minimum payments, with the remainder added to the loan balance?

The type of mortgage that requires the borrower to make minimum payments, with the remainder added to the loan balance, is an interest-only mortgage. In this arrangement, borrowers are typically responsible only for paying the interest during the initial period of the loan. As a result, they are not reducing the principal balance; rather, the total amount owed can increase as these payments are made. This situation can lead to a larger remaining balance than what was initially borrowed by the end of the interest-only period if no principal payments are made.

In many cases, borrowers might find this option appealing for its lower initial payment structure, but it is crucial to understand the long-term implications, as the principal still needs to be paid off ultimately. Understanding this type of mortgage is essential for evaluating payment structures and assessing financial decisions properly.