Posted by Ed Garcia on September 04, 2003 at 10:00:13:
An OPEN END loan, also know as a mortgage or DEED OF TRUST for future advances, allows a borrower to secure additional funds from a lender under terms specified in the original loan. Thus, an open-end lender can advance funds to a borrower on an existing loan.
In many instances, these funds represent the principal already paid. This allows a loan to stay alive for a longer period of time and can save the borrower, in some cases, the time and much of the expenses of refinancing.
The funds advanced by this process are repaid by either extending the term of the loan or increasing the monthly payments by the amount appropriate to maintain the original amortization scheduled. The interest rate can also be adjusted accordingly, and appropriate fees can be charged.