DEFINITION of 'Tandem Loan'

Two loans taken out on one asset, which is usually a house; the secondary loan is normally added to a primary loan. A tandem loan may also refer to a lending facility that enables businesses to bridge the gap between commercial loans and other sources of funding, with loan proceeds used for working capital, acquisitions, or land and equipment. They could provide monetary assistance to builders and developers of nonprofit public housing.

BREAKING DOWN 'Tandem Loan'

A specific type of tandem loan is the Federal Housing Administration's FHA/VA Tandem Loan, which is only available to veterans for financing single-family loans. Tandem loans should not be confused with a tandem plan, which refers to a mortgage purchase program involving Fannie Mae and Ginnie Mae.

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