What is an open-end loan?

An open-end loan is defined as a mortgage loan that allows for expansion by increments. This type of loan typically enables the borrower to withdraw additional funds up to a predetermined limit without having to take out a new loan, which can be particularly beneficial for ongoing expenses or projects.

For example, a homeowner might take out an open-end mortgage to remodel their house, initially borrowing a certain amount and then later borrowing more as their remodeling needs change. This flexibility in accessing additional funds sets open-end loans apart from other mortgage types, which are generally fixed in total amount.

In contrast, the other choices refer to different forms of loans that don’t capture the essence of an open-end loan. A mortgage that cannot be expanded would be considered a closed-end loan, where the amount borrowed is fixed after closing. A short-term loan with high interest does not describe a mortgage, as it refers more to personal or payday loans. Lastly, a loan secured by a non-existent mortgage suggests an illegal or ineffective mortgage structure, which does not apply here.