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Takeout commitment

Definitions of Takeout commitment

  • A takeout commitment is a promise from a lender to provide permanent financing that will "take out" interim or construction financing under specified conditions or at a certian point in time or stage in the project.
    The construction lender made the loan contingent on the developer obtaining a takeout commitment from another lender.


What Is A Takeout Commitment?

A takeout commitment is a loan commitment from a commercial bank that ensures there will be financing for a commercial property once an interim loan or construction loan comes due.

The takeout commitment assures the issuer of the interim or construction loan that there will be financing available for a commercial real estate development to pay off the interim financing or construction loan, typically in the form of a longer term commercial mortgage. Another commercial mortgage lender has made a commitment to make a long term commercial mortgage to the borrower to take out previous short term financing.

The takeout commitment reduces the risk of the borrower defaulting on the interim financing or construction loan. For this reason, construction lenders may want to see a takeout commitment to ensure they will get their money back.


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