Definition
An End Loan, also known as a Permanent Mortgage, is a long-term mortgage loan used to finance the acquisition of a property after the completion of construction. An end loan typically follows a construction loan or interim financing that covered the costs of building or developing the property. The primary purpose of an end loan is to repay the interim loan and provide stable, permanent financing.
Examples
- Residential Development: Suppose a developer constructs a new residential building. During the construction phase, the developer uses a construction loan to fund the project. Once the construction is completed, the developer obtains an end loan, or permanent mortgage, to pay off the construction loan and secure long-term financing until the property is sold or leased.
- Commercial Development: A company builds a new office complex using a construction loan to cover the building costs. When construction is done, the company transitions to an end loan, ensuring continuous financing without the short-term pressures and often higher interest rates of a construction loan.
Frequently Asked Questions
Q: What is the key difference between an end loan and a construction loan? A: The primary difference is that a construction loan is a short-term loan used to finance the construction of a property, while an end loan is a long-term mortgage obtained after the completion of the construction to replace the construction loan.
Q: Can an end loan have the same terms as a construction loan? A: No, typically, an end loan has different terms. Construction loans often have higher interest rates and shorter repayment periods. In contrast, end loans offer more stable, long-term financing with terms similar to traditional mortgages.
Q: When should one apply for an end loan? A: Applicants should apply for an end loan when the construction of their property is nearing completion. This timing ensures that there is no gap in financing between the end of construction and the start of the mortgage.
Q: Are there specific eligibility requirements for an end loan? A: Yes, eligibility for an end loan depends on various factors such as credit score, income stability, property value, and an assessment that confirms the successful completion of the construction project.
Q: What are the typical interest rates for end loans compared to construction loans? A: End loan interest rates are generally lower than construction loan rates given they are long-term and carry less risk from the lender’s perspective once construction is complete.
Related Terms
- Construction Loan: A short-term loan meant for financing the actual construction or renovation of a building. It typically has a higher interest rate and is replaced by a permanent mortgage or end loan upon project completion.
- Interim Financing: Temporary funding used during the transition phase of a construction project from commencement to obtaining long-term end loan financing.
- Permanent Loan: Another term for an end loan or permanent mortgage, emphasizing its long-term nature.
Online Resources
- Investopedia: What Is a Permanent Loan?
- Zillow: Construction Loans – What They Are and How They Work
References
- “Real Estate Finance & Investments”, by William Brueggeman and Jeffrey Fisher.
- “The Real Estate Game: The Intelligent Guide To Decisionmaking And Investment”, by William J. Poorvu.
- “Mortgage Markets and Institutions: Innovative and Revitalized”, by David Kiesel.
Suggested Books
- “The Complete Guide to Financing Real Estate Developments”, by Ira Nachem
- “Real Estate Finance and Investments”, by Peter Linneman
- “Investing in Real Estate, 8th Edition”, by Gary Eldred
Real Estate Basics: End Loan Fundamentals Quiz
