Open-End Mortgage

Real estate finance: Mortgage that allows the issuance of additional bonds having equal status with the original issue, but that protects the original bondholders with specific restrictions governing subsequent borrowing under the original mortgage. For example, the terms of the original Indenture might permit additional mortgage-bond financing up to 75% of the value of the property acquired, but only if total fixed charges on all debt, including the proposed new bonds, have been earned a stated number of times over the previous 5 years. The open-end mortgage is a more practical and acceptable (to the mortgage holder) version of the open mortgage, which allows a corporation to issue unlimited amounts of bonds under the original first mortgage, with no protection to the original bondholders. An even more conservative version is the limited open-end mortgage, which usually contains the same restrictions as the open-end, but places a limit on the amount of first mortgage bonds that can be issued, and typically provides that proceeds from new bond issues be used to retire outstanding bonds with the same or prior security.

Trust banking: corporate trust indenture that permits the trustee to authenticate and deliver bonds from time to time in addition to the original issue. See also Authentication.

A Mortgage under which the Mortgagor (borrower) may secure additional funds from the Mortgagee (lender), usually stipulating a ceiling amount that can be borrowed.
Example: Poole obtains an open-end mortgage to purchase a home. Under the mortgage agreement, Poole may borrow additional funds over the Maturity of the loan as long as the unpaid Principal does not exceed 80% of the home's Appraised value.

A mortgage which permits the mortgager to borrow additional funds for improvements after the original loan has been made and permits him to repay them over an extended amortization period.

A mortgage that allows the borrowing of additional sums, often on the condition that a stated ratio of collateral value to the debt be maintained. A mortgage that provides for future advances on the mortgage and which so increases the amount of the mortgage.