What does the term "balloon mortgage" refer to?

The term "balloon mortgage" refers specifically to a loan structure where regular payments are made throughout the term, but these payments are not sufficient to pay off the entire loan balance by the end of the term. As a result, a large final payment, often referred to as a "balloon payment," is required at the end of the loan period. This type of mortgage typically features lower monthly payments compared to a fully amortized mortgage, which can make it appealing for certain borrowers, though it does come with the risk of needing to make a substantial payment at the end.

The other options describe different types of loan arrangements that do not accurately represent what a balloon mortgage entails. For example, a fixed interest rate loan involves consistent payments without a large concluding balance, while a short-term loan with no initial payments doesn't fulfill the primary characteristics of a balloon mortgage. A decreasing balance loan would imply that the principal reduces steadily over time, rather than leaving a significant payment at the end. Thus, the characteristic nature of a balloon mortgage clearly aligns with the description provided in the correct answer.