Skip to content
The Ultimate Glossary of Hard Money Loan Terms
Ryan G. WrightOct 26, 2021 8:35:00 PM8 min read

The Ultimate Glossary of Hard Money Loan Terms

Real estate comes with its own language. We’ve put together a handy glossary to help you get a feel for this new world.

The jargon used by real estate investors can get confusing. I’ve collected the most commonly used terms you’ll see when it comes to hard money lending and real estate investing below. Feel free to bookmark this page as a quick reference guide for when you need to know what terms you should use or keep an eye out for. 


  • After Repair Value (ARV) – The projected value of a property once repairs or renovations are completed.
  • Appraisal – A professionally issued estimate showing the current or projected value of a property.
  • As-Is Value – The value of a property as it exists today.


  • Balloon Payment – A large loan payment that pays the debt off in full. Balloon payments are different from paying off a loan early in that they’re explicitly specified to be paid at a hard date in a loan contract. 
  • Bridge Loan – A short-term loan a real estate investor uses to accrue enough funds for purchases or repairs when they don’t have enough cash on hand.
  • BRRR – Pronounced as “burr.” This is an acronym that stands for Buy, Rehab, Rent, Refinance. BRRR loans are short-term loans used for renovating a property with the intent to rent it out and refinance later via a mortgage or other long-term loan. 


  • Cap – The maximum amount an adjustable-rate mortgage can increase. There are both interest-rate caps and payment caps.
  • Capitalization Rate – The ratio of net operating income an asset or property produces and the current market value or original cost. Capitalization rates are typically used as a way to measure the projected value of a real estate investment. 
  • CDOM – Cumulative Days on Market. The total number of days between a property being listed on the MLS and a successful sale. 
  • Closing – The event where the buyer and seller transfer ownership of a property. 
  • Closing Costs – Fees charged by a lender or professional related to the transfer of ownership for a property. Closing costs can include purchase price, title fees, appraisals, legal fees, etc.
  • Commercial Use – A property zoned to be used for commercial or business-related use only and has no residential facilities. 
  • Contingency – An element that affects whether or not a contract will proceed. Contingencies will often affect whether or not earnest money deposits are returned.
  • Cross-Collateralization – A way investors will utilize the equity they have in other properties to secure financing for a new investment without using a down payment. 


  • Default – The term used to signify a loan is now 30 days past due.
  • Distressed – When a property shows signs of disrepair or is unkempt.
  • DOM – An acronym that stands for Days On Market. The number of days a property has been listed for sale on the MLS.
  • Draw Schedule – A schedule given to hard money lenders that shows payment plans used for construction projects. This helps lenders understand when money will need to be issued and how it will be used. 
  • Due Diligence – The research an investor will take to ensure they have the complete picture of a potential investment property. This can include inspections, appraisals, title research, and other factors related to the condition of a property and its ownership.


  • Earnest Money – A deposit made by a potential buyer to secure their right to put the property under contract. 
  • Equity – The amount of ownership a person or company holds over a property. Equity is based on how much a borrower owes on a loan or mortgage subtracted from the current value of a home. Equity can be used as leverage for lines of credit or as a way to increase net worth. 
  • Escrow Account – An account used to hold money reserved for a financial transaction. Financial institutions use escrow accounts to hold cash and disburse payments for property purchases, repair costs, loan repayments, etc. They can also be used for landlords and tenants to hold security deposits.
  • Exit Strategy – The plan a real estate investor has for paying off their debt obligations. Typically, exit strategies will have multiple scenarios that range from “best case” to “last-ditch” should something (or everything) go wrong. 


  • Fix & Flip – A property that’s purchased with the intent of repairing or improving upon and sold at a higher price.
  • Foreclosure – Both a process and event where the lender takes over ownership of a property due to non-payment. 


  • Guarantor – A third party who takes responsibility for any loan repayment should the primary borrower be unable to pay back their debts.


  • Hard Costs – Costs associated with the improvement or repair of a property. 
  • Hard Money Loan – Short-term loan used by real estate investors to secure financing for BRRRs or fix & flips. 
  • Holdback – Funds from a hard money loan held onto by the lender until a real estate investment reaches a particular milestone. Holdbacks are a way for lenders to secure funding when they don’t have money to put down as a deposit. 
  • Holding Costs – Also known as “Carrying Costs.” These are costs that are associated with the property while an investor owns it. A few examples are insurance, HOA fees, landscaping, and utilities. 
  • HUD-1 – A form used by the Department of Urban Housing and Development which lists transactions that happen between the buyer, seller, and lender of a property.


  • Interest Rate – A percentage attached to the principal of a loan charged by a lender in exchange for issuing a loan. 


  • Joint Venture – An agreement taken by two or more entities that will undergo a single project together. Joint Ventures are often used when bringing on partners or guarantors as a one-time event or for a single real estate property. 


  • Lien – A legal document showing the temporary property ownership to the lender until a past-due debt obligation is paid in full. 
  • Liquidity – The amount of cash available today.
  • Loan Officer – The person at a financial institution in charge of evaluating and approving loan applications.  
  • Loan Points – The fee associated with the execution of a loan. Each point equals a percentage of the loan’s principal.
  • Loan to Cost (LTC) – A ratio that compares the amount of a loan for a commercial property divided by the repair and rehab costs. 
  • Loan to Value (LTV) – A ratio that compares a proposed loan amount against the appraised value of a property. 


  • Maturity – The date of a final loan payment.
  • Mixed-Use – Properties that have multiple zoning uses available. Typically this is for properties that are both commercial and residential, like an apartment building that has a retail storefront on the street level.
  • MLS – An acronym that stands for Multiple Listing Service. The central database of current properties for sale.
  • Mortgage – A loan issued by a financial institution to secure the purchase of a property. Until the mortgage is paid in full, the lender will hold a position on the Title. 
  • Multi-Family – The category for a property that can house more than one family unit. 


  • Non-Conforming Loan – Loans that don’t meet conventional financing guidelines used by traditional lenders. 


  • Origination Fee – Administrative fee charged by a lender to facilitate the approval and disbursement of a loan. 


  • Position – Relating to the Title, an order of claims against the ownership of a property. Lenders will hold the First Position before the owner until the loan is paid in full. If there are multiple lenders, there will be multiple positions that go in order (First, Second, Third, etc.)
  • Prepayment Penalty – The percentage charged by a lender for a loan that will be paid in full before the maturity date. Prepayment penalties help lenders rework their projected income that they initially assumed to have based on the loan term. 
  • Private Lender – Lenders that are not associated with banks or other large financial institutions. Private lenders can be hard money lenders, friends, family, or other places not directly tied to banks. 
  • Proof of Funds – A bank statement showing an investor has the financial ability to follow through on a financial transaction.


  • Real Estate Agent – A person who helps source and sell a property.
  • Real Estate Broker – A person who helps facilitate a real estate transaction like a hard money loan or mortgage.
  • Realtor® – The title given to a real estate agent or broker who is a member of the National Association of Realtors. Only current registered members can use this title.
  • Refinance – Replacing an old loan with a new loan, typically for a better interest rate or more extended payment plan.
  • Residential – A zoning category for properties that are primarily used for housing individuals or families. 


  • Scope of Work – The itemized list of work and costs that a contractor will do. 
  • Seasoning – The amount of time a loan must be active before a full repayment can be made. 
  • Short Sale – A real estate transaction where the seller attempts to prevent foreclosure by having a buyer purchase the property for less than what’s due on the current mortgage. The lender of the original mortgage must approve a short sale.
  • Single Family Home – A freestanding property that can house one family. 
  • Soft Costs – Costs associated with a project like legal or financial fees. 
  • Sweat Equity – The value added to a property through non-financial additions made by the owner or other party. Sweat equity has no tangible value but can sometimes be negotiated as a factor relating to equity. 


  • Term – The length of a mortgage. 
  • Title – Document showing ownership of a property. 
  • Turnaround Time (TAT) – The amount of time it will take for a property to be sold once it’s purchased. 


  • Underwriter – A person who handles the verification of a borrower’s income, assets, debt, and property details before a loan can be issued.
  • Underwriting – The risk assessment a lender uses to decide whether or not a loan should be issued. 


  • Vacancy – The ratio of unoccupied units of a multi-family, commercial, or industrial property against the total number of units. 


  • Waterfall – A provisional agreement that lists the order of priorities concerning the distribution of cash for a property. 
  • Wholesaling – The real estate investment method of securing and selling purchase contracts to other buyers. 


  • Yield – The rate of return on a security. Factors like interest payments, purchase price, time until maturity, and redemption value all affect the yield rate. 


  • Zoning – The categorization of land made by a governing body for how it can be used. There are typically four standard zone categories: Residential, Commercial, Industrial, and Mixed-Use. 

    Learn how to make money flipping real estate with us by attending our next webinar.