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.

INVESTOPEDIA EXPLAINS '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. Loan

    The act of giving money, property or other material goods to ...
  2. First Mortgage

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

    A loan amount that may be drawn down, or is due to be contractually ...
  4. Average Revenue Per User (ARPU)

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

    An interest-bearing account that typically pays a higher interest ...
  6. Compound Interest

    Interest calculated on the initial principal and also on the ...
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. Savings

    What Canadian banks offer the best savings accounts?

    Learn about different savings accounts in Canada. Explore different interest rates and fees as well as accounts that are protected by the CDIC.
  6. Savings

    What US banks offer the best savings accounts?

    Explore the best savings accounts offered by national banks comparing annual yield and other factors. Learn why the highest-yield accounts are offered online.
  7. Budgeting

    What US banks offer free checking accounts?

    Quit wasting money on monthly fees associated with your checking account and get a free checking account from reputable national banks.
  8. Just how are bank stress tests performed and what is the logic behind them? And is a stress test useful for evaluating a bank's stock?
    Investing Basics

    An Investor's Guide To Bank Stress-Testing

    Just how are bank stress tests performed and what is the logic behind them? And is a stress test useful for evaluating a bank's stock?
  9. Credit & Loans

    What is the difference between a state and a federally chartered credit union?

    Learn how federal chartered credit unions are regulated by the NCUA, while state chartered unions are regulated by their state's division of financial services.
  10. Bank of America isn't America's central bank, but given its size and spread, you could be forgiven this misapprehension.
    Stock Analysis

    How Bank of America Holds 1/8 of All U.S. Deposits

    Bank of America isn't America's central bank, but given its size and spread, you could be forgiven this misapprehension.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center