Final answer:
An interest-only mortgage is a type of mortgage where the borrower makes regular payments of interest only, without repaying the principal. The borrower can address the remaining principal amount through options like refinancing, lump-sum payments, or selling the property.
Step-by-step explanation:
In mortgage terminology, a type of mortgage where the borrower makes regular payments of principal and interest but these payments are not enough to fully repay the total principal amount by the end of the term is called an interest-only mortgage. In this type of mortgage, the borrower pays only the interest on the loan for a specific period of time, usually 5 to 10 years. After this initial period, the borrower may have to start paying both principal and interest.
The mechanism to address the remaining principal amount depends on the terms of the mortgage. The borrower may have several options, such as refinancing the loan, making a lump-sum payment to reduce the principal, or selling the property to repay the loan. The borrower should consult with their lender to understand the available options and choose the best course of action.