Intermediate terms

Investment Loan Terms Reference

Navigate the diverse world of real estate investment financing with this curated collection of key terms. This reference highlights commonly encountered loan products and lending concepts that might be helpful when exploring your investment options, offering clarity on essential terminology.

Learning Path

Debt Service

Debt service is the total amount of principal and interest payments required to repay a loan over a specific period, typically for a mortgage or other property-related financing.

Beginner11-12 min

Real Estate Refinancing

Real estate refinancing is the process of replacing an existing mortgage loan with a new one, typically to secure better terms, lower payments, or access property equity for investment purposes.

Intermediate15-18 min

Fix and Flip Loan

A specialized short-term real estate loan designed for investors to purchase, renovate, and quickly resell distressed properties for profit, typically covering both acquisition and rehabilitation costs.

Intermediate5 min

Debt Yield

Debt Yield is a commercial real estate lending metric calculated as a property's Net Operating Income (NOI) divided by the total loan amount, used to assess a loan's risk by measuring the property's income-generating capacity relative to the debt, independent of interest rates.

Advanced12-15 min

Multifamily Loan

A multifamily loan is a type of commercial real estate financing used to purchase, refinance, or develop properties with five or more residential units, distinct from traditional single-family mortgages.

Intermediate5 min

Debt Service Coverage Ratio

The Debt Service Coverage Ratio (DSCR) is a financial metric used in commercial real estate lending to assess a property's ability to generate sufficient Net Operating Income (NOI) to cover its annual mortgage debt payments.

Advanced15-18 min

Investment Property Loan

An Investment Property Loan is financing used to purchase real estate intended for income generation or capital appreciation, not for the borrower's primary residence. These loans have distinct qualification requirements and terms compared to owner-occupied mortgages.

Intermediate5 min

Interest Rate

An interest rate is the percentage charged by a lender for the use of borrowed money, typically expressed as an annual percentage of the principal amount.

Beginner15-18 min

Portfolio Lender

A portfolio lender is a financial institution that originates and holds loans on its own balance sheet, providing flexible underwriting and customized terms for real estate investors, particularly for complex or non-conforming properties.

Advanced2 min

DSCR Loan

A DSCR loan is a non-qualified mortgage for real estate investors, where loan eligibility is determined by the investment property's Debt Service Coverage Ratio (DSCR), assessing its ability to generate enough income to cover its mortgage payments, rather than the borrower's personal income.

Advanced9 min

CMBS Loan

A Commercial Mortgage-Backed Security (CMBS) loan is a form of commercial real estate financing where multiple commercial mortgages are pooled, securitized into bonds, and sold to investors, offering non-recourse debt for large-scale properties.

Advanced8 min

Loan-to-Value Ratio

The Loan-to-Value (LTV) ratio is a financial metric used by lenders to assess the risk of a mortgage loan, calculated by dividing the loan amount by the property's appraised value, expressed as a percentage.

Intermediate14-15 min

Non-Recourse Loan

A non-recourse loan is a type of secured debt where the lender's claim for repayment is limited solely to the collateral property, protecting the borrower's personal assets from seizure in the event of default.

Intermediate14-15 min

Private Money Loan

A private money loan is a non-bank loan provided by individuals or private companies, secured by real estate, offering flexible terms and fast funding for real estate investors.

Intermediate12-13 min

Underwriting

Underwriting is the process by which lenders assess the risk of lending money for a real estate transaction, evaluating the borrower's creditworthiness and capacity to repay, as well as the property's value and marketability.

Intermediate15-18 min

Portfolio Loan

A portfolio loan is a mortgage originated and held by the lender on its own balance sheet, offering flexible underwriting for unique real estate investment properties that don't fit conventional lending criteria.

Intermediate5-6 min

Hard Money Loan

A hard money loan is a short-term, asset-backed real estate loan from private lenders, primarily based on the property's value rather than the borrower's credit, used for quick acquisitions or rehab projects.

Intermediate13-14 min

Conventional Loan

A conventional loan is a mortgage not backed by a government agency, adhering to Fannie Mae and Freddie Mac guidelines, commonly used by real estate investors for various property types.

Intermediate11-12 min

Construction Loan

A construction loan is a short-term, interim financing option used to cover the costs of building a new property or undertaking significant renovations, with funds disbursed in stages as construction progresses.

Intermediate12-15 min

FHA 203k Loan

An FHA 203k loan is a government-insured mortgage that allows homebuyers to finance both the purchase or refinance of a property and the cost of its rehabilitation or renovation into a single loan, based on the property's value after improvements.

Intermediate5 min