What type of loan involves only paying interest over time?

A straight or term mortgage is characterized by payments that cover only the interest accrued over the term of the loan. This means that during the life of this type of loan, the principal balance does not decrease, and the borrower is responsible solely for paying the interest charges.

This structure is often attractive to borrowers who prefer to manage cash flow by not having to pay down the principal until the end of the loan term. At maturity, the entire principal amount becomes due in a lump sum payment. Such loans are typically used for investment properties or in situations where the borrower expects to have access to funds or a strategy to refinance or sell before the principal repayment is due.

In contrast, amortized loans involve periodic payments that include both principal and interest, leading to gradual paydown of the loan balance over time. A balloon mortgage has a large final payment after a series of smaller payments, which means it also does not fit the description of solely paying interest. A fixed-rate mortgage can be amortized or interest-only, depending on the terms, so it doesn't specifically indicate that only interest is being paid. Thus, the straight or term mortgage is the most accurate answer to the question asked.