What is typically true regarding interest rates on balloon mortgages?

Balloon mortgages often feature lower initial interest rates that can lead to lower monthly payments during the early years of the loan. However, these rates are typically fixed only for a specific period, after which the remaining balance of the loan is due in a lump-sum payment, known as the balloon payment. This means that while borrowers enjoy lower payments at the beginning, they face the risk of a significant spike in payment obligations when the balloon payment comes due. This structure makes option C the most accurate representation of how interest rates on balloon mortgages tend to function. The variability over time in repayment amounts, especially resulting in a larger final payment, underscores the financial planning considerations that borrowers must take into account when considering balloon mortgages.

The other options do not accurately characterize balloon mortgages. While some fixed-rate loans exist, interest rates on balloon mortgages can indeed change after the initial fixed period, but that variability isn’t necessarily vast or typical. Interest rates linked to credit scores are relevant for determining the overall interest a borrower may be offered, but they don't define the structure of balloon mortgages specifically.