Real estate lending, term by term.
Private real estate lenders size a loan against the property and the plan rather than a pay stub, and the vocabulary reflects that: loans are measured against cost (LTC), current value (LTV), or finished value (ARV), rental deals are measured by coverage (DSCR), and construction money is released in stages (draws). Every term below is defined in plain English, with the same worked examples we use on the program pages. If you came here to find out what ARV means, or what a DSCR of 1.0x actually implies for a rental, those two are the ones worth reading first.
23 terms · definitions taken from our published program pages
What is Accounts Receivable financing?
Advances against invoices you've issued but haven't been paid on yet. Turns receivables on 60-day terms into working capital now.
Used inBusinessWhat is After-Repair Value (ARV)?
What the property will be worth once all the rehab work is complete, validated by an appraiser familiar with comps in the local market.
Example: Buy at $300K, rehab $75K, ARV $550K → loan sized against $550K.
What is Collateral?
What secures the loan, equipment, receivables, or sometimes the business itself (blanket lien). Collateral type drives rate and structure.
Used inBusinessWhat is Debt Service Coverage Ratio (DSCR)?
The ratio of the property's monthly rental income to its monthly debt payment (PITIA, principal, interest, taxes, insurance, association dues). 1.0x means income exactly covers debt.
Example: $4,200 rent ÷ $3,360 PITIA = 1.25 DSCR.
What is Draw schedule?
Construction loans release funds in stages as work is completed and inspected. A typical draw schedule has 5–10 stages mapped to milestones.
Example: Foundation → 15%, framing → 20%, MEP rough-in → 15%, etc.
Used inConstructionWhat is Exit strategy?
How the bridge gets paid off. Lenders require a clear exit up front, sale, refinance to permanent, stabilization, or portfolio refi.
What is Extension option?
The right to extend the term, usually 6 months, for a fee. Useful insurance if your exit slips.
Used inBridgeWhat is Hybrid ARM?
Fixed rate for the first 5, 7, or 10 years, then adjusts annually. Often prices below a full 30-year fixed and makes sense for hold-and-refi plans.
Used inInvestment PropertyWhat are Interest-only payments?
Some DSCR loans offer 10-year interest-only payments. Lower monthly cost, stronger cash flow, but no principal paydown during the I/O period.
What is Line of credit (LOC)?
Revolving credit you draw on as needed and repay down. You only pay interest on what you've drawn. Great for working capital and receivables timing.
Used inBusinessWhat are Loan covenants?
Ongoing requirements, minimum balance, financial reporting, debt-to-equity caps, baked into the loan agreement.
Used inBusinessWhat is Loan term?
How long the bridge is in place before you exit. Shorter terms price better, a 12-month bridge usually beats a 24-month one on rate.
What is Loan-to-Cost (LTC)?
The percentage of total project cost, land + hard costs + soft costs, the lender will finance. An 85% LTC means you bring 15% equity, the lender funds the rest.
Example: On a $1.5M project, 85% LTC = up to $1.275M financed.
What is Loan-to-Purchase (LTP)?
The loan amount as a percentage of the purchase price alone, before any rehab budget. Some lenders price the purchase and the rehab separately — you might see 85% LTP + 100% of rehab.
Used inFix & FlipWhat is Loan-to-Value (LTV)?
The loan amount as a percentage of the property's appraised value. On a stabilized property that means the current value; construction and rehab lenders usually quote it against the as-completed value instead, written as LTV of ARV.
Example: If the finished home will appraise at $2M, a 70% LTV-of-ARV cap = up to $1.4M.
What are Origination points?
A one-time fee at closing expressed as a percentage of the loan, e.g. 2 points on a $400K loan = $8K.
Used inFix & FlipWhat is PITIA payment?
All-in monthly housing cost: principal, interest, taxes, insurance, and HOA. DSCR lenders underwrite against this, not just P&I.
Used inInvestment PropertyWhat is Prepayment penalty?
Some bridges have minimum interest periods (e.g. 3-month lockout) before you can pay off without a fee. Worth knowing up front.
What is Rehab reserve / holdback?
Rehab dollars aren't in your account on day one. They sit with the lender and release in draws as you complete work.
Used inFix & FlipWhat is Swing loan?
Another name for a bridge loan, used most often on residential deals. It describes the same thing: short-term capital secured by the property that carries you from one position to the next.
Example: A borrower buying before their current home sells is asking for a swing loan, whether or not they use the word.
Used inBridgeWhat is Term loan?
Lump-sum financing paid back over a fixed term, 1 to 5 years typical. Good for equipment, expansion, or specific projects.
Used inBusinessWhat is Term sheet?
The one-page summary of a proposed deal: amount, rate, term, fees, and the conditions attached. It is a proposal rather than a commitment, and the conditions are the part worth reading twice.
Example: Six numbers usually decide a bridge term sheet: loan amount, rate, points, term, extension terms, and prepay.
Used inBridgeWhat is Transitional loan?
The informal name for the residential transition loan category — the purchase-and-rehab loan and the bridge alike. It is also used descriptively, for a property between states: mid-lease-up, mid-repositioning, or not yet stabilized.
Example: A partially leased building that a bank will not finance until occupancy stabilizes is a transitional deal.
Used inBridge