LEARN
The lending terms, in plain English.
A quick reference for the terms that come up when you finance an investment property.
- DSCR (Debt-Service Coverage Ratio)
- A property's rental income divided by its debt service (principal, interest, taxes, insurance, and dues). At 1.0 the rent exactly covers the payment; higher is stronger.
- ARV (After-Repair Value)
- The estimated market value of a property once renovations are complete. Fix & flip leverage is often capped at a percentage of ARV.
- LTV (Loan-to-Value)
- The loan amount as a percentage of the property's value. Lower LTV means more borrower equity.
- LTC (Loan-to-Cost)
- The loan amount as a percentage of total project cost (purchase plus rehab or construction).
- PITIA
- Principal, interest, taxes, insurance, and association dues — the full monthly carrying cost used in a DSCR calculation.
- Bridge loan
- Short-term financing that carries a property through a transition, such as lease-up or repositioning, before it qualifies for permanent debt.
- BRRRR
- Buy, Rehab, Rent, Refinance, Repeat — a strategy where an investor renovates a property, rents it, then refinances into long-term financing such as a DSCR loan.
- Seasoning
- The time a borrower must own a property before certain financing, such as a cash-out refinance, becomes available.
- Draw schedule
- A construction or rehab loan released in stages (draws) as work is completed and verified, rather than all at once.
- Business-purpose loan
- A loan for a property held for investment or business use, not a consumer or owner-occupied residence.
- SOFR
- The Secured Overnight Financing Rate, a benchmark some commercial and bridge loans are priced against, such as SOFR plus a spread.
- Interest-only
- A payment structure where the borrower pays only interest for a set period, common on short-term investor loans.
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