An End Loan Agreement, sometimes called a takeout loan or permanent mortgage, is the financing arrangement that replaces a construction loan once your project is finished. Construction loans are short-term loans used to cover building expenses, usually with higher interest rates and variable terms. When construction concludes and the property receives a Certificate of Occupancy, borrowers must secure an End Loan to pay off the construction debt and begin long-term mortgage payments.

Typically, the process involves first securing a construction loan, followed by building the home or property. Once completed, a permanent lender evaluates the finished property’s value and finances a long-term mortgage under the End Loan Agreement. The new mortgage pays off the construction loan, allowing borrowers to transition to standard mortgage payments over 15 to 30 years.

Some lenders offer construction-to-permanent loans that combine both phases into a single closing, saving time and fees. However, these are not always available and often have stricter requirements.

An End Loan Agreement impacts borrowers, construction lenders, permanent lenders, appraisers, and indirectly contractors. Borrowers must plan early, maintain good credit, and communicate with lenders to ensure smooth financing transition.

Common pitfalls include assuming automatic loan conversion without a separate End Loan closing, delaying permanent loan arrangements, and overspending during construction which can affect appraisal values.

For reliable permanent financing, understanding the End Loan Agreement is crucial. It secures your ability to repay the construction loan and own your property with a stable mortgage.

For more detail, see our related glossary on Construction Loan, and explore our guide on Take-Out Loans for further context on financing transitions.

Sources: