Reference
Investor Financing Glossary
The vocabulary investor lenders actually use, defined in plain English — each term linked to the full guide or calculator where it matters. Cite freely; a link back is appreciated.
- After-Repair Value (ARV)
- The estimated market value of a property after planned renovations are complete, established by comparing finished, renovated sales — not aspirational listings. Rehab and flip lenders cap loans as a percentage of ARV (commonly 70–75%), which makes the appraiser's ARV, not yours, the binding number in the deal.
- Fix & Flip Loans guides →Fix & Flip Calculator →
- Amortization
- The scheduled repayment of a loan's principal over its term through the monthly payment. A 30-year amortization spreads principal across 360 payments; early payments are mostly interest, with the split shifting toward principal over time. Short-term investor loans typically skip amortization entirely and charge interest-only.
- Balloon Payment
- A lump-sum principal payoff due at a set date before the loan would fully amortize — common in seller-carryback notes (for example, payments computed on a 30-year schedule with the full balance due in year five). The balloon date is effectively a refinance deadline, so it should be set with a realistic exit in mind.
- Creative Financing guides →
- Bridge Loan
- Short-term financing (typically 12–24 months, interest-only) that carries a property from one state to another: purchased before another asset sells, vacant before leased, unstabilized before it qualifies for permanent debt. Underwriting centers on the exit — exactly how the loan gets repaid.
- Bridge Loans guides →
- BRRRR
- Buy, Rehab, Rent, Refinance, Repeat — a strategy that acquires and renovates on short-term money, stabilizes the property as a rental, then refinances into long-term debt (usually a DSCR loan) at the improved value, recycling the recovered cash into the next deal.
- DSCR Loans guides →
- Cap Rate
- Net operating income divided by property price, expressed as a percentage. Cap rate ignores financing entirely, which makes it the standard tool for comparing properties to each other; it says nothing about your leveraged return on cash.
- Rental Calculator →
- Cash-on-Cash Return
- Annual pre-tax cash flow divided by the actual cash invested (down payment, closing costs, points, and any rehab you funded). Unlike cap rate, it measures your position including leverage — the number that tells you what your money is earning in this deal versus the next one.
- Rental Calculator →
- Cash-Out Refinance
- Replacing an existing loan with a larger one and taking the difference in cash — the standard way investors extract equity without selling. Investor cash-out programs cap leverage below purchase LTVs (commonly around 70–75%) and may require seasoning: a minimum ownership period before the new value counts.
- DSCR Loans guides →
- Cross-Collateralization
- Securing one loan with more than one property, letting equity in an existing asset substitute for cash down payment on a new one. Common in bridge lending — for example, buying the next property before the current one sells by pledging both.
- Bridge Loans guides →
- Draw (Rehab Draw)
- A reimbursement from a renovation loan's holdback, released after the lender verifies completed work — usually by inspection. Investors front each construction phase and are repaid in arrears, so draw turnaround time (typically 3–7 business days) is a real cash-flow variable in project planning.
- Fix & Flip Loans guides →
- DSCR (Debt Service Coverage Ratio)
- Monthly rent divided by the property's full monthly payment (PITIA). A DSCR of 1.25 means the rent covers the payment with 25% to spare. DSCR loan programs use this ratio in place of the borrower's personal income — the property qualifies, not the person.
- DSCR Loans guides →DSCR Calculator →
- Due-on-Sale Clause
- A standard mortgage provision letting the lender demand full payoff when the property transfers ownership. It's the central structural risk in subject-to and wraparound deals: historically enforcement has been uncommon while payments stay current, but it remains a contractual right the lender can exercise.
- Creative Financing guides →
- Fix-and-Flip Loan
- Short-term financing covering both acquisition and renovation of a property intended for resale — typically 80–90% of total project cost, with rehab funds held back and released through draws. Priced like hard money, structured for construction.
- Fix & Flip Loans guides →Fix & Flip Calculator →
- Hard Money Loan
- Asset-based, short-term financing underwritten primarily on the property and the deal rather than the borrower's income — interest-only payments, terms of 6–24 months, rates well above conventional debt. Its product is speed and certainty: closings in one to two weeks that let investors compete with cash buyers.
- Hard Money Loans guides →Hard Money Calculator →
- Holdback
- The portion of a renovation loan reserved for rehab costs rather than wired at closing. It's disbursed through draws as work completes. A '$300k loan with a $75k holdback' delivers $225k at closing and reimburses the rest during construction.
- Fix & Flip Loans guides →
- Interest-Only Payment
- A payment covering only interest, with no principal reduction — standard on hard money and bridge loans, and available on many DSCR programs as a way to improve the qualifying ratio. The full principal remains due at maturity or refinance.
- Loan-to-Cost (LTC)
- Loan amount divided by total project cost (purchase price plus rehab budget). A lender offering 85% LTC on a $575,000 project will fund up to $488,750, with the investor covering the balance plus points and closing costs. The companion constraint is the ARV cap, which often binds first.
- Hard Money Loans guides →Hard Money Calculator →
- Loan-to-Value (LTV)
- Loan amount divided by the property's appraised value. Investor programs typically cap purchase LTV around 75–80% and cash-out LTV lower. On renovation loans, lenders track LTV against both as-is and after-repair value.
- Net Operating Income (NOI)
- Rental income minus operating expenses — taxes, insurance, association dues, maintenance, management, vacancy — but before any mortgage payment. NOI is the numerator of cap rate and the property-level profitability number that survives changes in financing.
- Rental Calculator →
- PITIA
- Principal, Interest, Taxes, Insurance, and Association dues — the full monthly housing payment used as the denominator in DSCR underwriting. Notably absent: vacancy, maintenance, and management, which is why a 1.0 DSCR is a financing threshold, not proof of profit.
- DSCR Loans guides →DSCR Calculator →
- Points (Origination Points)
- An upfront fee equal to 1% of the loan amount per point, charged at closing. On short-term loans, points dominate the true cost of capital: two points on a six-month loan cost as much as four extra percentage points of annualized rate.
- Hard Money Loans guides →Hard Money Calculator →
- Portfolio Loan
- A loan the lender keeps on its own books instead of selling into the secondary market, freeing it from agency guidelines. In investor practice the term also covers blanket facilities financing multiple rentals under one note — a common structure for scaling DSCR portfolios.
- DSCR Loans guides →
- Prepayment Penalty
- A fee for paying a loan off early, standard on DSCR loans — typically a step-down (e.g., 5-4-3-2-1% over five years). It exists because investors refinance and sell often; if your plan exits inside three years, the penalty structure belongs in your math alongside the rate.
- DSCR Loans guides →
- Rate Buydown (2-1 Buydown)
- A temporary reduction of the borrower's effective rate — 2 points lower in year one and 1 point in year two for a 2-1 structure — funded by depositing the payment difference at closing, usually as a seller concession. The note rate itself never changes, so a later refinance stays fully available.
- Creative Financing guides →Buydown Calculator →
- Rent Schedule (Form 1007)
- The appraiser's market-rent opinion for a single-family rental, prepared alongside the appraisal. DSCR lenders use it to establish qualifying rent — which means the 1007, not your pro-forma, decides the ratio. Supporting it with strong rent comps up front is cheap insurance.
- DSCR Loans guides →
- Seasoning
- A required holding period before a lender will recognize an event for underwriting — most commonly, months of ownership before a refinance can use appraised value instead of purchase price, or months of payment history on an existing note. Seasoning rules vary widely by program and shape BRRRR timelines.
- DSCR Loans guides →
- Seller Carryback
- Seller financing: the seller takes back a note and deed of trust for part or all of the price, becoming the lender. Terms are fully negotiable, making it the cleanest creative-financing tool — most viable with sellers who own free and clear and prefer income to a lump sum.
- Creative Financing guides →
- Subject-To
- Buying a property while the seller's existing mortgage stays in place — title transfers, and the buyer makes the old loan's payments. The appeal is inheriting a below-market rate; the risks are the due-on-sale clause and the documentation burden. Done properly, it requires written seller disclosure, attorney-drafted documents, and a payoff plan if the note is called.
- Creative Financing guides →
- Term Sheet
- A lender's preliminary, non-binding summary of proposed loan terms — amount, rate, points, term, leverage, and conditions. Investor lenders often issue them same-day from basic deal facts; treat the term sheet as the start of diligence, not a commitment to fund.
- Wraparound Mortgage
- A form of seller financing where the seller's new note 'wraps' their existing mortgage: the buyer pays the seller, and the seller keeps paying the underlying loan. It shares subject-to's due-on-sale exposure and adds a payment chain that should be run through third-party servicing.
- Creative Financing guides →