Hard Money Lending Glossary

Hard Money Lending Glossary2019-02-28T05:31:06+00:00
1031 Exchange2019-02-23T06:39:13+00:00

The process by which a taxpayer may defer recognition of capital gains and related federal income tax liability on the sale and purchase of investment properties within a limited timeframe.


A written opinion and analysis of the estimated market value of real estate from a licensed professional for both the interior and exterior of the property. See Evaluation.


The interest paid after it’s accrued. For example, a payment on October 1 pays for interest owed for the entire month of September.

Assessor’s Parcel Number (APN)2019-02-23T06:43:24+00:00

The number used by the tax assessor to identify a parcel of land.


The person to whom rights to a property, title, or other interest are transferred.


A place where properties are sold to the highest bidder. Also known as a foreclosure (county) auction or a sheriff’s sale.

Balloon Loan2019-02-23T06:45:05+00:00

A loan that calls for a large sum to be paid at the end of the loan term.


A proceeding authorized by federal law that provides debtors with various kinds of relief from their debts. Types include Chapter 7, 11, and 13.


The individual or entity borrowing funds to complete a real estate deal.

Bridge Loan2019-02-23T06:45:55+00:00

Short term financing that bridges the gap until other financing is obtained, typically for a term of less than one year. Also known as a swing loan or bridge financing.

Broker Price Opinion (BPO)2019-03-23T09:13:07+00:00

A property inspection by a licensed real estate broker which results in a written evaluation of the property and the estimated sale price. See Evaluation.


The detailed financial plan for real estate purchase, flip, construction, and sale.

Cash Flow2019-02-23T06:47:08+00:00

An individual’s or entity’s income minus expenses over a particular time period. Typically, monthly.


The period that marks that a new loan transaction has funded.

Closing Costs2019-02-23T06:48:00+00:00

The fees paid at closing for loan origination and processing, including attorneys’ fees, fees for recording a mortgage/deed of trust, fees for title search, taxes, and insurance.


Something pledged as security for the repayment of a loan. Types include:

  • Real Estate Collateral – The real property used to secure repayment of a real estate loan.
  • Cash Collateral – A deposit held by a lender in lieu of a down payment.

The status given to a loan when the payment on the loan is delinquent and efforts are made to collect the amount due. Collection is typically handled by the loan servicer.

Combined Loan to Value (CLTV)2019-02-28T05:30:49+00:00

The sum of all liens on the property divided by the value of the property. Lenders often use the term LTV synonymously with CLTV. CLTV is typically used when there is more than one lien and LTV is used when there is only one lien.

Credit Report2019-02-23T06:49:30+00:00

The information collected by credit bureaus about an individual’s credit history, including a list of credit accounts, their balances, and monthly payments, along with collection accounts and public record information such as liens and bankruptcies.

Credit Score2019-02-23T06:49:56+00:00

A number based on information in the credit report that is used by most lenders to decide whether to extend credit and at what cost. The most common score used is the FICO score.


A person or business from whom one borrows or to whom money is owed.

Debt-To-Income Ratio2019-02-23T06:51:24+00:00

The amount of money owed each month as a percent of gross income. For example, $2,500 of debt payments / $5,000 of gross income = 50% DTI (debt-to-income) ratio.


The status given to a loan when a borrower fails to comply with any of the agreed-upon terms of the loan, or to work out terms agreed upon during the collection process, including timely repayment, maturity, or other violations of the deed of trust. Loans in default can be subject to higher rates, additional fees, and foreclosure.

Default Interest Rate2019-02-23T06:52:12+00:00

An increased interest rate imposed if there is a breach of the loan terms.


The funds advanced by a lender to the borrower throughout the construction process for the completion of specific line items, which increase the outstanding balance.

Drive by Appraisal2019-03-23T09:13:48+00:00

A written opinion and analysis of the estimated market value of real estate from a licensed professional based solely on the exterior of the property. See Evaluation.

Due Date2019-02-23T06:53:39+00:00

The date when a loan payment is due each month.


The difference between the fair market value (appraised value) of real property and any outstanding loans, liens, and encumbrances. Most lenders require equity to ensure the borrower has a financially vested interest in the property.

Escrow Company2019-02-23T06:58:07+00:00

A company that oversees the execution of real estate transactions, including closing documents, disbursement of funds, and the recording of documents at the county offices. Also known as a settlement services company.

Estoppel Certificate2019-02-23T06:58:37+00:00

A form used in commercial real estate to verify rents, leases, mortgage balances, monthly payments, etc., on a property.


The method in which the value of a real estate property is determined. Various types of evaluations include:

  • Appraisal – A written opinion and analysis of the estimated market value of real estate from a licensed professional for both the interior and exterior of the property.
  • Broker Price Opinion (BPO) – A property inspection by a licensed real estate broker which results in a written evaluation of the property and the estimated sale price.
  • Drive by Appraisal – A written opinion and analysis of the estimated market value of real estate from a licensed professional based solely on the exterior of the property.
  • Fair Market Value – The value of a property based on comparable sales (“comps”) of similar properties within the last six months.
Extension Fee2019-02-23T07:00:28+00:00

A fee paid by a borrower to extend an existing loan for an additional term, upon lender approval. Also known as a renewal fee.

Fair Market Value2019-03-23T09:14:15+00:00

The value of a property based on comparable sales (“comps”) of similar properties within the last six months. See Evaluation.

FEMA Flood Zone2019-02-23T07:02:17+00:00

The geographic areas that FEMA has designated as flood zones according to their varying levels of flood risk. These zones are depicted on a community’s flood insurance rate map (FIRM) or flood hazard boundary map. Each zone reflects the severity or type of flooding in that area.

FICO Score2019-02-23T07:03:08+00:00

A credit score developed by Fair Isaac & Co. that assesses the likelihood that credit users will pay their bills. See Credit Score.

Forced Place Insurance2019-02-23T07:03:49+00:00

The insurance placed on a property by the lender (lien holder) in the event a borrower allows their own coverage to lapse. The premium is advanced by the lender and billed to the borrower to be paid within 30 days.


The legal process by which an owner’s right to real property is terminated, typically due to a default. Types of foreclosure include:

  • Judicial Foreclosure – A type of foreclosure that allows the lender to retain all profits from a foreclosure sale.
  • Nonjudicial Foreclosure – A type of foreclosure that allows the lender to retain only enough funds to satisfy the debt, including interest fees and costs.
Foreclosure Fees2019-02-23T07:05:07+00:00

The costs (legal and other) incurred by a lender to foreclose on a property. These costs are the responsibility of the borrower.


The process of funds being disbursed to the borrower during the closing of a new loan transaction.

Grace Period2019-02-23T07:05:56+00:00

The period between the due date (i.e. 1st of the month) and the date late charges will assess.

Hard Money Lender2019-02-23T07:06:22+00:00

A lender that makes private money loans that traditional lenders typically won’t fund.

Hard Money Lending Acronyms2019-02-23T09:19:24+00:00

APN – Assessor’s Parcel Number
ARV – After Repair Value
CLTV – Combined Loan to Value
FICO – Fair Isaac Corporation
IO – Interest Only
LLC – Limited Liability Company
LTC – Loan to Cost
LTE – Long Term Extension
LTV – Loan to Value
PML – Private Money Lender
POF – Proof of Funds
SREO – Schedule of Real Estate Owned
TIN – Tax Identification Number
UCC Filing – Uniform Commercial Code Filing
UW – Underwriter


The money paid regularly at a particular interest rate for the use of money lent. Common types of interest include:

  • Interim (or Prepaid) Interest – The interest paid by the borrower at loan closing from the funding date to the end of that month.
  • Periodic Interest – The money owed each period as defined by the note, usually monthly.
Interest Rate2019-02-23T07:07:56+00:00

The percentage rate that lenders charge for the use of their money. Also known as note rate.

Interest Reserve2019-02-23T07:08:19+00:00

The funds paid by the borrower and held by the lender for future interest payments. Typically, these occur on construction loans.

Investment Property2019-02-23T07:08:46+00:00

A non-owner occupied property. Can be commercial or residential.

Late Fee2019-02-23T07:10:14+00:00

A fee paid by a borrower if a loan payment is not made before the end of the grace period.


A legal claim on real property, generally for the payment of a debt or obligation.

Lien Position2019-02-23T07:11:10+00:00

The position that determines claim priority on a property. The two different types include:

  • First Position – This position is the primary mortgagor on the property.
  • Junior Lien – A lien against a property not in first position or priority. For example, a second mortgage, or third or fourth position.
Line Item2019-02-23T07:11:39+00:00

A specific cost in a construction budget. Multiple line items add up to the total budget.


The ability to convert assets to cash without significant time delay.

Loan-to-Value Ratio (LTV)2019-02-23T07:12:27+00:00

The amount of outstanding debt on real property divided by the fair market value of the property.

Maturity Date2019-02-23T07:13:24+00:00

The date when the full loan balance, accrued interest, and fees are due to be paid off as defined on a note or loan modification agreement.

Maturity Fee2019-02-23T07:12:57+00:00

The fee assessed to a loan not paid off by the due date.


The document that pledges collateral property(ies) as security. Also known as a deed of trust or trust deed.


An abbreviation for promissory note. It discloses the interest rate and terms of the loan and is an obligation of debt.


The act of paying off a loan by paying the outstanding principal amount and any additional interest and/or fees due to completely satisfy the loan obligation.

Payoff Statement2019-02-23T07:15:07+00:00

A statement that provides information on the amount of money required to pay off a loan through a specific date.

Per Diem2019-02-23T07:15:35+00:00

The daily rate of interest as defined in the note.

Personal Guarantee2019-02-23T07:15:59+00:00

A guarantee by an individual to a lender for the entire outstanding loan amount plus legal fees, accrued interest, and costs associated with collecting the loan. This type of guarantee entitles the lender to access the individual’s personal assets to repay the loan.


Finance charges paid at closing. Each point equals 1% of the loan amount. For example, one point on a $100,000 loan is equivalent to $1,000. Some lenders charge a flat fee rather than points. Also known as origination fees.

Preliminary Title Policy2019-02-23T07:16:48+00:00

A search performed by a title company to determine property ownership and the liens filed on the property. Includes an offer to insure title on a property. Also known as a binder or title commitment.

Prepayment Penalty2019-02-23T07:17:12+00:00

The penalty a lender may impose if a loan is paid off before it is due or before a specified time period, as defined in the loan’s note.

Principal Balance2019-02-23T07:17:38+00:00

The outstanding balance of the principal on a loan, which does not include interest or other charges.

Private Money Lender (PML)2019-02-23T07:18:02+00:00

See Hard Money Lender.


The process of obtaining a new loan on an already-owned property.


The list of work to be performed under a contract or subcontract in the completion of a renovation project. Typically broken out into specific line items.

Security Interest2019-02-23T07:20:15+00:00

An ownership interest that a lender takes in the borrower’s property to ensure repayment of the debt. Typically through a mortgage or deed of trust.


A company that handles all payment-related transactions with borrowers, including accepting monthly payments, issuing monthly statements, providing year-end tax statements, and paying property taxes and insurance when due.

Sheriff’s Certificate2019-02-23T07:21:00+00:00

The certificate of sale after a judicial foreclosure.

Tax Identification Number (TIN)2019-02-23T07:21:35+00:00

A number issued by the IRS identifying a taxpayer. Usually a Social Security Number (SSN) for an individual or an Employer Identification Number (EIN) for a business.


The evidence of right to ownership of real property.

Title Company2019-02-23T07:22:53+00:00

A company that searches county and public records for liens and encumbrances against a subject property and the borrower.

Title Insurance2019-02-23T07:23:26+00:00

An indemnity policy issued by a title company that insures an owner and/or lender against loss due to title defects, liens, or encumbrances. Also known as a title policy.

UCC Filing2019-02-23T07:23:50+00:00

Also known as uniform commercial code filing. A county or state filing to secure real property and/or fixtures (assets or inventory related to the property). Typically related to commercial property.


The process lenders use to determine the risks related to the property and the involved borrower for any given loan.