Back-to-Back Commitment
Barron's Banking Dictionary:
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Back-To-Back Commitment
Two-part commitment by a lender. The first part is an advance on a construction loan; the second is a long-term commitment, also called the Take-Out Commitment by the same bank lender for permanent mortgage financing on the property.
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Back-to-Back Commitment
Investopedia Financial Dictionary:
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Back-to-Back Commitment
A commitment to make a second take-out loan that piggybacks another loan. With a back-to-back commitment, once the terms of the first loan are satisfied, it will be rolled into the second loan.
Investopedia Says:
The best example of a back-to-back commitment is when a bank makes a construction loan to build a house. Once the house has been built and a certificate of occupancy issued, the bank will make a new loan, probably a first mortgage loan, to take out the construction loan. The bank's commitment will specify the conditions that must be met in order for the commitment to fund the second loan to be valid.
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Barron's Banking Dictionary
Dictionary of Banking Terms. Copyright © 2006 by Barron's Educational Series, Inc. All rights reserved.
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