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Hard money has its own vocabulary. LTV, LTC, ARV, DSCR, holdback, draw schedule, points, CTC — if you do not know these terms cold, you will lose credibility with lenders in the first conversation. Here is the complete reference guide.
Market Value The price a property would sell for on the open market under normal conditions. This is what a licensed appraiser determines. Not what Zillow says.
AIV — As-Is Value The appraised value of a property in its current condition, before any renovations. The starting point for fix and flip underwriting.
ARV — After-Repair Value The appraised or estimated value of a property after all planned renovations are complete. This is the number that drives fix and flip lending. The lender is not lending on what the house is worth today — they are lending on what it will be worth when the work is done. Getting your ARV right is one of the most critical skills in hard money.
LTV — Loan-to-Value The loan amount as a percentage of the property's value. If a property is worth $400,000 and the loan is $300,000, the LTV is 75%. For stabilized properties (DSCR, bridge), LTV is based on current or as-is value.
LTC — Loan-to-Cost The loan amount as a percentage of the total project cost. More relevant for fix and flip and construction deals. If your purchase price is $200,000 and rehab budget is $100,000, your total cost is $300,000. A loan of $240,000 would be 80% LTC. Lenders typically cap fix and flip loans at 85-90% LTC and 70-75% of ARV, whichever is lower.
DSCR — Debt Service Coverage Ratio Used for rental property loans. The ratio of a property's rental income to its total debt obligations (mortgage payment, taxes, insurance, HOA). A DSCR of 1.0 means income exactly covers expenses. Lenders typically require 1.1 to 1.25. Below 1.0 means the property does not cash flow — which is a problem.
Points Upfront fees charged by the lender, expressed as a percentage of the loan amount. One point = 1% of the loan. A $300,000 loan with 2 points costs $6,000 at closing. Hard money loans typically carry 1-4 points depending on the lender, deal type, and borrower profile.
Interest Rate Hard money rates are typically higher than conventional rates — generally in the 9-13% range, sometimes higher. These are short-term loans, so the total interest paid over the life of a 12-month loan is manageable even at a higher rate.
CTC — Cash-to-Close The total cash the borrower must bring to the closing table. This includes the down payment, points, and any other closing fees. Understanding CTC upfront prevents last-minute surprises that kill deals.
Origination Fee Another term for the broker or lender fee charged to originate the loan. Sometimes used interchangeably with points, sometimes in addition to points. Read the term sheet carefully.
Holdback The portion of the loan dedicated to renovation that the lender holds back at closing. The borrower does not receive this money upfront — it is disbursed in draws as work is completed. If a lender is funding $300,000 total with $100,000 in rehab, the $100,000 is the holdback.
Draw Schedule The plan for how and when holdback funds are released. Typically tied to construction milestones — foundation poured, framing complete, rough-ins done, drywall, finishes. The lender or a third-party inspector verifies completion before releasing each draw.
Dutch vs. Non-Dutch Interest A critical distinction for fix and flip and construction loans.
Always ask which structure a lender uses before signing.
Interest Reserve A portion of the loan set aside to make the monthly interest payments on behalf of the borrower. Instead of paying interest out of pocket each month, the payments come out of the reserve. This is useful for borrowers who want zero monthly out-of-pocket costs during the rehab phase.
Scope of Work (SOW) The detailed document outlining every planned renovation item, associated cost, and contractor. Lenders require a SOW to underwrite the rehab portion of the loan. A well-prepared SOW moves deals through underwriting faster. A vague or missing SOW is one of the most common reasons files stall.
Certificate of Occupancy (C of O) An official document from the city or county certifying that a new construction project is complete and safe to occupy. Required at the end of ground-up construction deals.
LOI / Term Sheet — Letter of Intent A non-binding document from a lender outlining the proposed terms of a loan. Think of it as the offer before the contract. It shows rate, points, LTC, LTV, term, draw schedule structure, and any key conditions. Comparing term sheets from multiple lenders is how you know you are getting a competitive deal.
AE — Account Executive The lender representative you work with as a broker. Your AE is your internal champion at the lending institution — they advocate for your file through underwriting.
Conditions / Stips (Stipulations) Items the lender requires before they will fund the loan. Common stips include property insurance, a signed scope of work, proof of entity, or a clean title commitment. Clearing stips quickly moves you to the closing table faster.
Clear to Close (CTC) Not to be confused with Cash-to-Close. This CTC means underwriting has approved the file, all conditions are cleared, and the loan is ready to fund.
Recourse vs. Non-Recourse
Sponsor / Guarantor The person(s) personally guaranteeing the loan. In hard money, this is often the borrower — the investor doing the deal. Some lenders require certain financial thresholds from sponsors; others are more flexible.
Correspondent Lender A lender that originates loans in its own name but sells them to a larger institution on the secondary market. Slightly more constrained than a direct balance sheet lender but often offers competitive programs.
Direct Lender / Balance Sheet Lender Lends its own capital and holds the loan on its balance sheet rather than selling it. More flexibility on exceptions and deal structure. The decision-maker is in-house.
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