Real Estate Terminology

Navigate the real estate finance world with ease. Our comprehensive guide demystifies key terms, empowering you to make informed investment decisions and communicate effectively.

Explore Real Estate Terminology

Welcome to our Real Estate Terminology guide, designed to help you navigate the complex world of real estate finance with ease. Whether you are a seasoned investor or new to the field, understanding these key terms is essential for making informed decisions and maximizing your investment potential.

Key Terms

Understand essential real estate terms like LTV, ARV, and ROI to make informed decisions, communicate effectively, and maximize your investment potential. Your knowledge is your greatest asset.

Hard Money Loan

A short-term loan secured by real estate, typically used for investment purposes such as fix-and-flip projects.

Bridge Loan

Temporary financing used to bridge the gap between the purchase of a new property and the sale of an existing one.

LTV (Loan-to-Value)

The ratio of a loan amount to the appraised value of the property, expressed as a percentage.

ARV (After Repair Value)

The estimated value of a property after renovations and improvements have been completed.

Equity

The difference between the market value of a property and the amount owed on the mortgage.

ROI (Return on Investment)

A measure of the profitability of an investment, calculated as a percentage of the initial investment.

Mezzanine Financing

A hybrid of debt and equity financing, typically used in commercial real estate transactions.

Rehab Loan

A loan used to finance the renovation and improvement of a property.

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Why Understanding Real Estate Terminology Matters

Having a solid grasp of real estate terminology empowers you to:

Make Informed Decisions

Knowledge of key terms helps you understand the nuances of real estate transactions, ensuring you make the best choices for your investments.

Communicate Effectively

Use industry-specific language to communicate more effectively with lenders, brokers, and other professionals in the field.

Maximize Investments

Leverage your understanding of real estate finance to identify and capitalize on profitable opportunities.

Real Estate Definitions

Bridge - Purchase

Loan type that is extended for the sole purpose of the borrower to purchase the property.

Bridge - R/T Refinance

Loan type that is used to allow the borrower to seek a lower rate or different terms.

Bridge - Cash Out Refinance

Loan type that is bigger than the current loan amount in order to convert home equity into cash

Purchase w/ Holdback

Loan type.

Property Type

Type of property.

Borrowing Entity

Borrowing entity as found in the loan documents.

Mortgagor

The individual who will be the guarantor on the property.

Guaranty Type

Type of Guaranty agree upon by the lender and borrower as noted in the term sheet and loan documents.

Recourse

Lender has legal right to fully collect the pledged collateral should the borrower not be able to pay the debt obligation.

Non-Recourse

Lender doesn’t have the legal right to fully collect the pledged collateral should the borrower not be able to pay the debt obligation.

As Is Value

The as is value noted by an appraiser from one of Churchill’s approved vendors.

As Repaired Value

The after repair value noted by an appraiser from one of Churchill’s approved vendors.

Value Source

Appraisal Management Company (AMC) or Non-AMC , other, or borrower derived the value of the property.

Property Acquisition Date

The date the borrower bought the property as noted in the loan documents.

Purchase Price

The price the borrower paid for the subject property noted in the loan documents.

Total Budget

Includes all potential costs estimated from beginning of project.

Total Cost

Purchase Price plus Total Budget.

Cost Spent to Date

Any costs spent on the subject project before the origination of the loan.

Remaining Budget

Total Budget minus Costs Spent to Date.

Pre-Rehab Square Footage

The total square feet of the subject property at the time of origination.

Post-Rehab Square Footage

The total expected square feet of the subject property upon completion of the project.

UPB (Unpaid Principal Balance)

Sum of the day 1 disbursement, disbursed rehab holdback amount and disbursed interest reserve if the interest reserve is funded by the total loan amount.

Day 1 Loan Amount

The part of the loan which was disbursed to the borrower at the time of closing.

Holdback Loan Amount

The part of the loan which is heldback to fund any subsequent draw requests.

Disbursed Holdback Amount

The amount of the holdback which has been disbursed to the borrower.

Holdback Balance

The amount remaining for future draw disbursements.

Interest Reserve Amount

The part of the loan which is used to fund the borrower’s monthly payments.

Total Loan Amount

The maximum loan amount which can be disbursed to the borrower unless modifications are made to the loan.

LTAIV

The day 1 loan amount divided by the as-is value amount.

LTC

The total loan amount divided by the total costs.

LTARV

The total loan amount divided by after repair value.

Cash Reserves

The amount of liquid cash the borrower has during the underwriting period minus any out-of-pocket costs which the borrower must cover at the time of closing.

Borrower FICO

The middle credit score from the credit report pulled, credit report must be within 3 months of origination.

Interest Rate

The rate the borrower must pay as noted in the loan documents.

Interest Accrual Type

The basis of which interest is accrued upon based on the loan documents (on total loan amount, or on the disbursed amount).

Term

Length of time until loan maturity.

Origination Date

Date noted in the loan documents as the closing date.

Funded Date

Date that the funds were actually released to the borrower or the day the loan was purchased (i.e. originator who is the seller of the subject loan vs seller who is not the originator).

First Payment Date

The first payment date of interest as noted in the loan documents.

Next Payment Date

The next payment date as determined by the servicer.

Original Maturity Date

The maturity date as noted by the loan documents.

Current Maturity Date

The updated maturity date if any loan modifications have taken place, if no modifications have taken place then set as original maturity date.

Total Origination Points

The upfront fee the borrower paid for the loan to be originated (denoted in a %).

Cross Collaterlization

For properties potentially under a cross collateralization agreement with another property.

Extension Options

Any extension options and fees denoted in the loan documents.

Borrower Experience- Number of Projects

Number of projects the borrower has completed in the previous 24 months.

Borrower Experience- Exit Value of Projects

Value of projects the borrower has completed in the previous 24 months.