Learn
Lending terms, in plain English.
A quick reference for the terms that come up when you finance an investment property.Reference
The language behind the loan
Use these definitions for orientation. Your actual documents and approved terms govern the transaction.- DSCR (Debt-Service Coverage Ratio)
- A property's rental income divided by its debt service (principal, interest, taxes, insurance, and dues). At 1.0 the rent exactly covers the payment; higher is stronger.
- ARV (After-Repair Value)
- The estimated market value of a property once renovations are complete. Fix-and-flip leverage is often capped at a percentage of ARV.
- LTV (Loan-to-Value)
- The loan amount as a percentage of the property's value. Lower LTV means more borrower equity.
- LTC (Loan-to-Cost)
- The loan amount as a percentage of total project cost, including purchase plus rehabilitation or construction.
- PITIA
- Principal, interest, taxes, insurance, and association dues. It is the full monthly carrying cost used in a DSCR calculation.
- Bridge loan
- Short-term financing that carries a property through a transition, such as lease-up or repositioning, before it qualifies for permanent debt.
- BRRRR
- Buy, Rehab, Rent, Refinance, Repeat. A strategy where an investor renovates a property, rents it, then refinances into long-term financing such as a DSCR loan.
- Seasoning
- The time a borrower must own a property before certain financing, such as a cash-out refinance, becomes available.
- Draw schedule
- A construction or rehabilitation loan released in stages as work is completed and verified, rather than all at once.
- Business-purpose loan
- A loan for a property held for investment or business use, not a consumer or owner-occupied residence.
- SOFR
- The Secured Overnight Financing Rate, a benchmark some commercial and bridge loans are priced against, such as SOFR plus a spread.
- Interest-only
- A payment structure where the borrower pays only interest for a set period, common on short-term investor loans.
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