End Loan
Definition and meaning of End Loan in real estate.
An end loan, also known as a permanent mortgage, is the final long-term home loan that a buyer secures to pay off a short-term construction loan or to purchase a newly completed property. This loan replaces temporary financing once the home construction is finished and the property receives a certificate of occupancy.
In more detail
Developers use short-term construction loans to fund the building phase of a project, but these loans must be repaid once building is complete. The end loan is the traditional 15-year or 30-year mortgage that the individual homebuyer takes out to purchase the finished unit, thereby supplying the funds to pay off the builder's construction loan.
In condominium developments, lenders often require a certain percentage of units in the project to be pre-sold before they will fund individual end loans. For buyers building custom homes, the transition from a construction loan to an end loan can sometimes be streamlined through a single construction-to-permanent loan program.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Also known as | Permanent mortgage or permanent financing |
| When it begins | Upon construction completion and occupancy approval |
| Who secures it | The individual homebuyer or property owner |
A homebuyer secures a construction-to-permanent loan where the bank pays the builder in phases during construction, and then automatically converts the total balance into a 30-year fixed-rate end loan once the house passes final inspection.
Frequently asked questions
What is the difference between a construction loan and an end loan?
A construction loan is a short-term, interest-only loan used to fund building expenses, whereas an end loan is a long-term mortgage used to purchase the finished home.
Why do lenders require condo projects to be mostly complete before issuing end loans?
Lenders want to ensure the project is viable and that the building will be fully occupied, which reduces the financial risk of default on individual units.