What is an open-ended mortgage loan. Is there a difference between an open-ended mortgage loan and a closed-ended loan? Are open ended loans available?
An open-ended mortgage loan is a type of mortgage that allows the borrower, over time, to borrow additional money against the original mortgage. The agreement, however, will not allow the borrower to go over a certain percentage of debt. For instance, if you have 100,000 available, generally in an open-ended mortgage you will not be able to exceed 80,000 in debt. The debt ceiling is placed in effect so that the mortgage debt never exceeds the value of the house.
Is there a difference between an open-ended mortgage loan and a closed-ended loan?
An open-ended mortgage loan has the availability of extended credit terms on the original loan. A closed-ended mortgage loan, the most common type of loan, does not have further credit extensions available. If you have a standard, closed-ended mortgage, and you have
available equity in your home, you will need to get a second mortgage if you wish to access those available funds. Borrowers that have an open-ended mortgage can continue to access available funds from their original mortgage throughout the life of the loan. These mortgages can be refinanced, but it is very unlikely if you refinance this type of mortgage if you will receive another one. Banks and other lending institutions can be very discriminatory on who they offer this type of loan.
Are open-ended mortgages available?
Open-ended mortgages are still currently available on the market. They are very hard to receive. To be eligible for an open-ended mortgage you musty first, find a bank willing to offer one and second, have an extremely high credit score. People who place very large down payments on homes may also qualify for this type of loan. These loans are available, even in today’s housing market, but they are very hard to find.