Back-to-Back Commitment

AAA

DEFINITION of '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.

BREAKING DOWN 'Back-to-Back Commitment'

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.

RELATED TERMS
  1. First Mortgage

    A mortgage in a first lien position on the property that secures ...
  2. Loan

    The act of giving money, property or other material goods to ...
  3. Loan Commitment

    A loan amount that may be drawn down, or is due to be contractually ...
  4. Debit Card

    An electronic card issued by a bank which allows bank clients ...
  5. Average Revenue Per User (ARPU)

    A measure of how much income a business generates, given the ...
  6. Money Market Account

    An interest-bearing account that typically pays a higher interest ...
Related Articles
  1. Retirement

    The Best Way To Borrow

    There are many avenues from which to drum up funding. Find out the pros and cons of each.
  2. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  3. Retirement

    Mortgage Asset-Liability Management Made Easy

    Should you refinance your mortgage to purchase other assets? Learn how to weigh your risk.
  4. Credit & Loans

    Mortgage Basics

    Learn how to navigate what may be your biggest and most important loan.
  5. Investing Basics

    Explaining Rehypothecation

    Rehypothecation occurs when an asset used as collateral for one party is reused in another transaction.
  6. Technical Indicators

    Key Financial Ratios to Analyze Retail Banks

    Learn about key financial metrics that investors use to evaluate retail banks, and how the industry is fundamentally different from most other industries.
  7. Economics

    What Does a Merchant Bank Do?

    A merchant bank is a financial institution that performs underwriting, loan services, financial advising and fund raising services to large corporations.
  8. Economics

    The 3 Biggest Canadian Banks

    Examine some of the largest banks in Canada, which also rank among the largest and most important banks in the industry worldwide.
  9. Economics

    The 4 Biggest Chinese Banks

    Learn how the Chinese banking system is operated and managed, and get information about the top four largest banks in the country.
  10. Economics

    What's an Irrevocable Letter of Credit?

    An irrevocable letter of credit (ILOC) is a financing vehicle used to facilitate commerce between two parties who are not familiar with one another.
RELATED FAQS
  1. How does investment banking differ from commercial banking?

    Investment banking and commercial banking are two primary segments of the banking industry. Investment banks facilitate the ... Read Full Answer >>
  2. Why do commercial banks borrow from the Federal Reserve?

    Commercial banks borrow from the Federal Reserve primarily to meet reserve requirements when their cash on hand is low before ... Read Full Answer >>
  3. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  4. What role does a correspondent bank play in an international transaction?

    A correspondent bank is most typically used in international buy, sell or money transfer transactions to facilitate foreign ... Read Full Answer >>
  5. What is the difference between a correspondent bank and intermediary bank?

    Correspondent and intermediary banks serve as third-party banks that coordinate with beneficiary banks to facilitate international ... Read Full Answer >>
  6. What net interest margin is typical for a bank?

    In the United States, the average net interest margin for banks was 3.03% in the first quarter of 2015. However, this was ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  2. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  3. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  4. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  5. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!