Hard Money Glossary for Flippers

This is a hard money lending glossary — short definitions of the words you will hear on a fix and flip, bridge, construction, or DSCR call. Private money, asset-based lending, ARV, LTC, draws, interest-only, and a dozen acronyms all live here.

I wrote it because investors lose time translating lender-speak instead of running the deal. You do not need to memorize every line. Skim the section that matches the conversation you are in.

Numbers below that are Best Lending Co specifics (close times, leverage, rates, reserves) match how we actually underwrite. The rest is industry language, said plainly.

What Are the Core Loan Types?

These are the products. Everything else in this glossary is vocabulary around them.

Hard money loan (private money, asset-based lending)

A short-term, business-purpose loan used to buy and/or rehab investment property. Underwriting leans on the asset, the deal, liquidity, credit, and experience — not a W-2 income file. Private money, hard money, and asset-based lending are the same family of financing.

Fix and flip loan

A short-term hard money loan (often about 12 months with us, extensions available) that funds purchase and rehab. Rehab money is typically held back and released in draws. At Best Lending Co this is interest-only, no prepayment penalty.

Bridge loan

A short-term, asset-based loan without a rehab holdback. Same speed-and-asset idea as a flip loan, used when you need to close or refinance quickly and are not drawing construction funds.

Ground-up / new construction loan

A short-term, asset-based loan that holds back construction funds and releases them as work is completed. Structurally similar to a flip loan, with a heavier build scope.

DSCR loan

Debt service coverage ratio financing for a long-term rental. Qualification is driven by the property’s income versus its debt payment, not a consumer mortgage income stack. Typical use after a flip or BRRRR: rehab on hard money, then take out to a lower permanent DSCR rate if you keep it. See our DSCR loans page.

FNFP / FNFR

Fix and flip purchase versus fix and flip refinance. A refinance of a recently purchased investment property is sometimes called delayed purchase financing.

What Do the Leverage Letters Mean (LTV, LTC, LTARV)?

They are different ways to cap how much can be lent. The smallest cap usually wins.

ARV (after repair value)

What the property should be worth after the planned rehab. Estimated up front by you and us, then typically confirmed by appraisal (or sometimes a BPO).

AIV (as-is value)

What the property is worth today, before work. Also estimated, then confirmed by appraisal or BPO.

LTV (loan to value)

Loan amount divided by value. People use it loosely. In private lending you will hear it as funding amount / as-is value, or total loan / ARV. Ask which value they mean.

LTAIV (loan to as-is value)

Funding amount divided by as-is value. How much of today’s value is being lent at closing.

LTP (loan to purchase)

Funding amount divided by purchase price. Simple: how much of the contract price is financed at the table.

LTC (loan to cost)

Total loan divided by total project cost. Cost is the raw pile: purchase + rehab (fees may be included depending on who is talking). At Best Lending Co, experienced borrowers often see about 90% purchase + 100% rehab (~92.5% LTC); first-timers are typically closer to ~90% LTC.

LTARV (loan to after repair value)

Total loan divided by ARV. Our typical ceiling is about 75% of ARV (70% is what we usually quote first-timers, with some room). This is the cap that kills thin-margin deals.

TPC (total project costs)

Purchase price + rehab budget, and sometimes loan fees. The denominator for LTC.

70% rule

A quick offer shortcut: many investors will not pay more than about 70% of ARV minus rehab. It is a rule of thumb, not a loan formula. Run max offer against actual LTC and LTARV.

MAO (maximum allowable offer)

The highest purchase price that still leaves profit (or a refinance) after rehab, hold, and selling costs. Not the same as what a lender will fund.

How Does the Money Move at Closing?

This is the cash-and-escrow layer.

COE (close of escrow)

The date the transaction actually closes — funds, recording, keys.

EMD (earnest money deposit)

Money you put in escrow when the seller accepts. It is applied toward what you still owe at closing. Lose it if you default on the contract without a valid out.

Funding amount

The dollars wired at closing. Total loan minus rehab holdback (fund control) minus any interest reserve held back. On a clean refinance with no holdbacks, funding amount can equal the full loan.

Principal / loan amount

The total size of the loan, including money that may still sit in holdback.

UPB (unpaid principal balance)

What is outstanding now. Does not include rehab or interest-reserve money that has not been disbursed yet.

Origination / points

The lender (and sometimes broker) fee for making the loan, expressed as a percent of the loan. At Best Lending Co, origination is typically 1–2.5%+, plus a $2,500 doc/processing fee on fix and flip (other programs can differ).

Broker / broker fee

A broker sends the file to a lender who funds it. The broker fee is the commission for a closed loan, usually paid by the borrower, sometimes by the funding lender.

Cash-out refinance

A refi where you walk away with meaningful cash (industry often treats more than a small leftover as cash-out). Guidelines and leverage differ from rate-and-term.

Rate-and-term refinance

A refi that mostly replaces the existing loan. Little or no cash in pocket. Timing and LTC caps still apply on DSCR takeouts.

Settlement statement (HUD / prelim HUD)

The closing statement that balances buyer, seller, lender, and title/escrow. People still say “HUD” even when the form is an ALTA or similar statement. Provided by title or escrow.

How Is Interest Calculated?

Short-term flip loans and 30-year rentals do not pay the same way.

Term

How long until the principal is due. Our fix and flip loans are typically 12 months.

Interest-only (IO)

You pay accrued interest each month. Principal is due at the end as a balloon. That is the usual structure on our short-term loans.

Fully amortized

Monthly payment includes principal and interest so the loan would pay off by the end of the term. Common on long-term DSCR, not on a 12-month flip.

Balloon payment

The lump-sum principal due at maturity on an interest-only loan.

ARM (adjustable-rate mortgage)

Rate can change after an initial period (often written 5/1, 7/1, 10/1). More of a long-term product conversation than a 12-month flip.

IAD (interest as disbursed) / non-Dutch interest

You pay interest only on money actually funded. Rehab sitting in holdback does not accrue until it is drawn. This is how our fix and flip loans work.

Dutch interest

Interest is charged on the full loan amount even if rehab is still held back. Opposite of IAD.

Arrears

Interest is billed for the month you already used the money (like a credit card), not prepaid like rent.

PPP (prepayment penalty)

A fee for paying off early. Our short-term fix and flip loans have no prepayment penalty. Long-term DSCR loans often do, commonly in the first several years.

Interest reserve (IR)

A slice of the loan set aside to cover a stretch of monthly interest. Separate from your cash reserves. We typically want to see about six months of interest-only payments plus 20% of rehab in liquidity you control.

Reserves

Cash (and sometimes discounted securities) sitting in accounts after closing so you can survive delays. Checking/savings usually count at 100%; retirement/brokerage with penalties often at 50%.

What Are Draws, Holdbacks, and Rehab Words?

This is the construction side of a flip or build.

Fund control / rehab holdback

Rehab (or construction) dollars kept in a controlled account and released as work is verified.

Draw

A request to fund a completed piece of the budget. On our files, draws go through an app with photos/video; approval is often hours, wire typically within about a day. Interest starts when that money is disbursed.

Inspection (draw inspection)

A third party (or, on lighter rehab, an in-app photo review) confirming work matches the draw.

Scope of work

The written rehab or build list the budget and draws follow.

Hard costs / soft costs

Hard costs are physical construction. Soft costs are permits, design, utilities, carrying costs, and similar.

Contingency

A buffer in the rehab budget for surprises. We still want extra cash outside the loan — that 20% rehab reserve.

Change order

A mid-project change to scope or cost. It can eat profit and delay draws.

Lien waiver

A contractor’s signed statement that they have been paid for the work in that draw, so they are not putting a mechanic’s lien on title.

Permits

City/county approval to do the work. Often required before certain draws.

Certificate of occupancy (CO / C of O)

Official sign-off that a build or major rehab can be occupied. Common on ground-up and heavy rehab.

Builder’s risk

Insurance for a property under renovation or construction. Typically required on rehab/construction files.

Holding costs

Interest, taxes, insurance, utilities, HOA, and other carry while you own it. Slow projects quietly kill flips.

What Title, Escrow, and Lien Terms Matter?

If it is recorded, it can control the deal.

Title company

The party that produces the title report and issues title insurance. On every purchase and refinance.

Escrow company

The intermediary that balances money and documents. In many states title also does escrow. In California they are often separate.

Title report (prelim / ALTA)

The property’s recorded history: liens, ownership, easements, requirements, exceptions. Schedule A is summary; B-1 requirements; B-2 exceptions. Lender’s title insurance is required. Owner’s policy is strongly typical.

Lien

A recorded claim against the property (mortgage, taxes, mechanic’s lien, and others).

First position (senior lien)

The first mortgage/deed of trust. In foreclosure, this lien has priority.

Second position (junior, mezzanine)

Behind first. In a foreclosure, the first has to be satisfied before the junior gets paid. Higher risk, different pricing.

Mortgage / deed of trust (DOT)

The security instrument recorded on title. Some states use mortgages (often judicial foreclosure). Some use deeds of trust (often a faster non-judicial process). Same job: the loan is tied to the house.

Gap lender

Someone funding the slice the first-position lender will not. That is usually a second.

Foreclosure

The legal process to take the property after default.

Default

Missing the deal you signed — commonly 30+ days late on payment, plus other covenant breaches.

Notice of default (NOD)

The recorded/legal notice that the loan is in default and foreclosure can start.

REO (real estate owned)

Property the lender has taken back.

What Documents Get Signed?

A complete file is not the same as a conventional W-2 stack.

LOS / LOM

Loan origination software (and origination + management software). The system that holds the application, docs, and file status. You do not need to care about the brand.

Loan docs

The closing package: note, mortgage/DOT, loan/construction agreement, guaranty, business-purpose / non-owner occupancy certs, and a pile of disclosures.

Note

The promise to pay — rate, term, default, what you owe.

Loan agreement / construction loan agreement

How the project, draws, and covenants work when there is a holdback.

Personal guarantee

Principals of the LLC usually still personally guarantee a hard money loan. The entity holds title; you still stand behind the debt.

Business-purpose / NOO (non-owner occupied)

The property is not your primary residence. Private money for flips is business-purpose. We do not fund owner-occupied consumer mortgages.

LLC / entity / vesting

How title is held. We strongly prefer an LLC for fix and flip. Title and the loan must vest the same way. Operating agreement and EIN show up in the file.

Appraisal vs BPO

An appraisal is a licensed valuation. A BPO (broker price opinion) is a lighter local-broker estimate. ARV and as-is get confirmed one of these ways.

Comps (comparables)

Recent similar sales used to support as-is or ARV.

Flood cert

Third-party flood-zone determination. It drives whether flood insurance is required.

HOI (homeowners insurance)

Hazard and liability coverage. Lenders require minimums on dwelling (rebuild/replacement) and liability. RCE is the replacement-cost estimator the insurer uses.

Mortgagee clause / loss payee

How the lender is listed on the insurance so a claim cannot skip the lienholder.

HOA

Homeowners association. Dues, rules, and estoppels can affect closing and DSCR expenses.

Who Else Is in the File?

Direct lender vs broker

We lend our own money on fix and flip — we are not brokering that product to a mystery fund at the last minute. Brokers shop files to whoever funds.

Servicing

The shop that invoices, collects payments, applies late fees, and may hold interest reserve or start default work.

Underwriting

Reviewing deal, experience, liquidity, credit, title, insurance, and docs until the file can close.

Clear to close

Underwriting is done; docs and figures can be issued.

Track record / experience

Completed projects in this asset class, usually focused on the last few years. First-timers can still qualify with us; leverage and price typically shift.

Liquidity

Usable cash behind the deal. The lever that often saves a thin credit or first-time file.

Exit strategy

Sell, or refinance (often DSCR). Decide before you close. A flip loan is not a 30-year plan.

Extension

More time after the original term if the project is still a project. Not automatic; still costs money.

Maturity date

The day the balloon is due if you have not paid off or extended.

Seasoning

How long you have owned the property. It affects some DSCR cash-out and value calculations.

What Investor and Market Terms Show Up Around the Loan?

Useful even when they are not on the term sheet.

BRRRR

Buy, rehab, rent, refinance, repeat. Hard money (or cash) for the buy/rehab; DSCR or similar for the refinance.

Wholesale / assignment

A contract assigned to another buyer, often for a fee. The end buyer still needs to close. Financing still has to fit the numbers.

Purchase agreement

The contract. Target close date on it is what we underwrite toward.

PITI / PITIA

Principal, interest, taxes, insurance (and HOA). On interest-only hard money you are not paying principal monthly, but taxes/insurance/HOA still count as carry. On DSCR they feed the ratio.

DSCR (the ratio)

Rent (or underwritten rent) divided by the property’s debt service. The loan product is named after this test.

NOI (net operating income)

Income minus operating expenses, before debt. Used in rental underwriting.

Cap rate

NOI divided by value. A valuation shorthand, not a hard money approval button.

Recourse

The lender can pursue the guarantor, not just the property. Hard money with a personal guarantee is recourse in practice.

Cross-collateral

More than one property securing one loan. Occasional, scenario-specific.

Table funding

A loan closes in one party’s name with another party’s capital at the table. Industry plumbing — not something you need to structure as a borrower.

AAPL

American Association of Private Lenders. Industry group for private lending standards and advocacy.

Frequently Asked Questions

Is hard money the same as private money?

Yes in normal conversation. Hard money, private money, and asset-based lending all describe short-term, property-focused, business-purpose financing rather than a bank W-2 mortgage.

What is the difference between LTC and LTARV?

LTC caps the loan against what the project costs. LTARV caps it against what the house should be worth finished. We look at both. The lower number is the one that matters.

Do I pay interest on rehab money I have not drawn?

Not with us. Interest accrues on disbursed funds (interest as disbursed). Money still in holdback is not accruing yet.

What does DSCR mean if I want to keep the property?

It is a rental loan that underwrites the property’s income. Common path: fix and flip to buy and rehab, then a DSCR refinance for a longer, lower-rate hold.

Why so many acronyms?

Because closing, title, and servicing grew up on shorthand. You only need the ones on your term sheet and draw schedule. The rest is so nobody can snow you on a call.