Property Flip Loan Glossary of Terms

After-Repair Value (ARV)

The estimated market value of a property once the planned renovation is finished. Lenders use it to size fix-and-flip loans, and investors use it to judge whether a deal has enough margin.

Max loan guidance = ARV × allowed % (for example, 65%)

Amortization

How a loan balance is paid down over time. Most hard money loans are interest-only during the term, so nothing is amortized and the principal is due at payoff.

Appraisal, CMA and BPO

Three ways to estimate value. An appraisal is a licensed appraiser’s report; a CMA is an agent’s comparative market analysis; a BPO is a broker price opinion. A lender may use one or a combination.

As-Is Value

What the property is worth today, before any work. Loan-to-value (LTV) is measured against it.

Assignment of Rents

A loan document that lets the lender collect rents from the property if the borrower defaults.

Balloon Payment

A large final payment of the remaining balance, due at maturity. Short-term interest-only loans end with a balloon, which is why the exit plan matters.

BRRRR

Buy, Rehab, Rent, Refinance, Repeat. A strategy for building long-term rentals and recycling the same cash into the next deal.

Bridge Loan

Short-term financing to buy or refinance quickly until a permanent solution is in place, such as a sale, a DSCR refinance, or a conventional or SBA loan.

Builder’s Risk Insurance

A policy that covers a property during renovation or construction, including materials, theft and certain on-site risks. Lenders often require it.

CapEx (Capital Expenditures)

Big-ticket improvements that extend a property’s life or value, such as a roof, HVAC or windows. Different from routine repairs.

Carry / Holding Costs

Everything you pay each month while you own the project: loan interest, taxes, insurance, utilities, lawn or snow care, security and so on.

Clear Title

Title free of liens or claims that would prevent a clean transfer. The title company verifies it.

Closing Costs

Fees due at settlement: title, recording, transfer taxes where they apply, lender points and fees, escrows and similar items.

Collateral

The asset securing the loan. Usually the property itself, sometimes additional property through cross-collateralization.

Comps (Comparable Sales or Rentals)

Recent sales or rentals of similar nearby properties, used to support an ARV or a market rent.

Contingency (Budget)

An extra line in the rehab budget, often 10–15%, for problems you only find once walls are open.

Credit Pull (Soft vs. Hard)

A soft pull does not affect your credit score; a hard pull may. Many private lenders weigh the property and your experience more than the score alone.

Cross-Collateralization

Securing one loan with more than one property, to lower the lender’s risk or increase leverage.

Debt Service

Your total loan payments over a period: interest and, where it applies, principal.

Debt Service Coverage Ratio (DSCR)

For rentals, how comfortably the property’s income covers its loan payments. Lenders often look for 1.10 to 1.25 or higher.

DSCR = Net Operating Income ÷ Annual Debt Service

Deed of Trust / Mortgage

The security instrument recorded against the property (which one depends on the state). It gives the lender rights if you default.

Default Interest

A higher rate that applies after a default event, as set out in the loan documents.

Draw (Construction or Repair Draw)

A partial release of your rehab budget as work is completed. It usually requires an inspection or photos, and lien waivers.

Draw Schedule

The plan for releasing rehab funds in stages, for example demo, framing, mechanical rough-ins, drywall, finishes and punch list.

Due Diligence

Your homework before closing: scope, comps, permit checks, contractor bids, inspections and title review.

Earnest Money Deposit (EMD)

The deposit a buyer puts down with an offer. It is credited toward the purchase at closing.

Equity

Property value minus what is owed. Investors also use it for the cash they put into a deal: down payment, closing costs and any rehab paid before draws.

Escrow

Money or documents held by a neutral third party, usually the title company, until the conditions of a sale or loan are met.

Exit Strategy

How the loan will be paid off: a sale, a refinance (DSCR or conventional) or another source of cash. Lenders want this to be clear from the start.

Extension

Extra time added to a loan term, usually for a fee and subject to the lender’s approval.

First Position (Lien)

The senior lien recorded against a property. It is paid first from sale or refinance proceeds.

Fix-and-Flip Loan

Short-term financing to buy, renovate and sell a property. Typically interest-only, with rehab draws and a set maturity date.

Floor / Minimum Interest

Some loans charge a minimum amount of interest (for example, three months) even if you pay off sooner. Worth clarifying before you sign.

General Contractor (GC)

The contractor who leads the renovation, coordinates the subcontractors and handles permits and inspections. Lenders may ask for a license and insurance.

Personal Guaranty

A promise by the borrower or owner to repay personally, in addition to the borrowing entity’s obligation.

Hard Costs / Soft Costs

Hard costs are the physical work: labor and materials. Soft costs are everything around it: permits, design, insurance, fees and interest.

Hard Money Loan

Asset-based financing that focuses on the property, the project and the borrower’s experience. Approval is often faster and more flexible than at a bank.

Holdback

Funds the lender keeps in reserve, such as the rehab budget or an interest reserve, and releases as milestones are met.

HUD-1 / Closing Disclosure (Settlement Statement)

The itemized list of every cost and credit at closing. Investors often just call it “the HUD.”

Inspection (Draw or Final)

A lender check, on site or by video and photos, that confirms work is complete before a draw is released.

Interest-Only (I/O)

Monthly payments cover interest only; the principal is due when the loan is paid off.

Interest Reserve

Part of the loan set aside at closing to cover interest payments during the project.

Leverage

Using borrowed money to increase your return on the cash you put in. It also increases risk, so know your downside.

Lien

A claim recorded against a property, such as a mortgage or deed of trust, a tax lien or a mechanic’s lien.

Lien Waiver

A signed release from a contractor or supplier confirming they have been paid for work to date. Lenders usually ask for them with each draw.

Loan Estimate / Term Sheet

A non-binding summary of proposed terms before the closing documents: rate, points, fees, LTC or LTV, and maturity.

Loan-to-ARV (LTARV)

The loan amount as a share of the after-repair value. Many flip lenders cap it around 65%, or use the lesser of a percentage of ARV and a percentage of total cost.

LTARV = Loan Amount ÷ ARV

Loan-to-Cost (LTC)

The loan amount as a share of the total project cost. It shows leverage against what you are actually spending.

LTC = Loan Amount ÷ (Purchase + Rehab + Closing Costs)

Loan-to-Value (LTV)

The loan amount as a share of the property’s current or appraised as-is value.

LTV = Loan Amount ÷ As-Is Value

Maturity Date

The date the full loan balance is due (the balloon).

Mechanic’s Lien

A lien a contractor or subcontractor can record if they are not paid. This is why lenders ask for lien waivers with draws.

Net Operating Income (NOI)

For rentals, income after operating expenses but before loan payments and CapEx. Used for DSCR and valuation.

NOI = Gross Rents – Operating Expenses

Non-Owner-Occupied

An investment property that is not the borrower’s primary residence. Most private loans require this.

Operating Expenses (OpEx)

The recurring costs of running a rental: taxes, insurance, management, maintenance, common-area utilities and similar.

Origination / Points

An upfront lender fee quoted as a percentage of the loan amount.

2 points = 2% of the loan amount

Per-Diem Interest

Interest for one day. Used to pro-rate interest at closing or payoff.

Permit

Local approval for certain work, such as structural, electrical or plumbing. Often required before a draw is released.

Prepayment Penalty

A fee for paying a loan off early. Many private loans have none, but some have a minimum interest period instead.

Promissory Note

Your written promise to repay, stating the rate, payment terms and what happens on default.

Proof of Funds (POF)

A document showing you have the cash for the down payment, closing costs and early rehab.

Refinance (Take-Out)

Replacing a short-term loan with longer-term financing, for example a 30-year DSCR loan.

Rehab Budget / Scope of Work (SOW)

A line-item list of repairs with costs and timeline. It drives both the ARV and the draw schedule.

Rehab-to-Rental (BRRRR) Loan

Short-term financing to buy and renovate, then refinance into a rental loan once the property is leased.

Rent Roll

A list of units, rents, deposits and lease dates, used to underwrite rental properties.

Seasoning

How long you have owned a property (title seasoning) or how long rental income has been in place. Some refinance programs require it, for example 3 to 12 months.

Second Position (Lien)

A junior lien behind the first. Higher risk, and fewer lenders allow it.

Seller Credit / Concession

An amount the seller agrees to credit toward your closing costs.

Survey

A map of boundary lines, easements and encroachments. Sometimes required by the title company.

T-12

The trailing 12 months of operating statements for a rental property.

Take-Out Loan

The long-term loan, or sale, that pays off your bridge or rehab loan.

Term

How long a short-term loan runs, commonly 6 to 12 months. Extensions may be available for a fee.

Title Commitment

The title company’s report before closing, listing what must be cleared and what the title policy will and won’t cover.

Title Insurance (Lender’s and Owner’s)

Insurance against covered title defects. The lender’s policy is typically required.

UCC-1

A filing that secures a lender’s interest in collateral other than real estate, such as business assets.

Underwriting

The lender’s review of a deal: value, budget, experience, credit and background, reserves and exit strategy.

Vacancy / Economic Vacancy

Physical vacancy is empty units. Economic vacancy is income lost to concessions, non-payment and similar.

Value-Add

Improvements that raise income or market value, such as unit renovations, added bedrooms or baths, or upgraded amenities.

Wholesale Deal

A purchase contract assigned by a wholesaler to the end buyer (the investor). Lenders may review the assignment and the final settlement statement.

Wholetail

Buying a property and reselling it with only light work, such as cleaning, paint and minor repairs, rather than a full renovation.

Wire Instructions (Verified)

Bank details for sending closing funds, confirmed directly with the title company. Always verify them by phone to avoid wire fraud.

Yield

The lender’s total return from interest and fees. Investors also use it for the return on the cash they put in.