Understand the language. Own the conversation.
Clear definitions for the terms you’ll encounter from the first offer to your next refinance.
ARV
After-renovation value: the estimated market value after planned improvements. Also called after-repair value. An appraisal may differ from your estimate.
Bridge loan
Short-term financing that can fund acquisition and renovation before a sale or long-term refinance.
Cash-on-cash return
Annual before-tax cash flow divided by actual cash invested. Include operating costs and debt service.
Cap rate
Annual net operating income divided by property value or price. Financing is excluded from NOI.
Contingency
Money set aside for unforeseen project costs, separate from the base contractor budget.
DSCR
Debt service coverage ratio. For many 1–4-unit rental loans, monthly rent divided by principal, interest, taxes, insurance, and association dues. Other loan types may use NOI / debt service.
Draw
A release of renovation funds, often after completed work is documented or inspected.
Equity
Property value less debt secured by the property. Paper equity is not the same as cash available.
LTC
Loan-to-cost: loan commitment divided by eligible project costs. This site uses purchase plus renovation; lender definitions differ.
LTARV
Loan-to-after-renovation value: total loan commitment divided by estimated completed value.
LTV
Loan-to-value: loan amount divided by the lender-accepted property value. Purchase underwriting may use the lower of price or appraisal.
NOI
Net operating income: property income less operating expenses, before debt service and income taxes.
PITIA
Principal, interest, property taxes, insurance, and association dues.
Prepayment penalty
A charge that can apply if a loan is paid off early. Confirm the amount and schedule before signing.
Reserves
Accessible funds remaining after closing to cover payments, repairs, and unexpected expenses.
Seasoning
A lender’s required period of ownership or rental history before certain refinance terms become available.
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