Hard Money Terminology You Should Know

Hard money loans are a different way of securing the funds necessary for your next commercial project. However, it comes with a different set of terminology that is important to understand if you want to find the best private lenders and get the best deals.

 

Appraisal – Use to determine the value of your assets or property.

 

After Repair Value (ARV) – A value used to determine the worth of a property once it has been repaired, often used to determine the overall quality of your collateral.

 

Bad Boy Clause – Used to describe the fraud indemnity and guarantee clauses in a loan agreement.

 

Balloon Loan – A balloon loan is a loan that requires a large sum of money to be paid at the end of the loan term.

 

Beneficiary Demand – The name given to a document that lists the requirements for a borrower to be released from their debt.

 

Beneficiary’s Statement – Statement of the remaining principal balance and addition information regarding the loan.

 

Bridge Loan – A short-term loan that bridges other financing that usually lasts less than a year. Interchangeable with swing loan and bridge financing.

 

Broker Price Opinion (BPO) – Property inspection by a licensed real estate broker that produces a written evaluation of your property.

 

Cap – A provision of a loan agreement that limits the increase or decrease in your interest rate.

 

Closing – A period that marks the final stages of a loan transaction.

 

Closing Costs – Fees that are paid for closing the loan. Includes processing fees, attorney fees and insurance.

 

Collateral – Assets that are used to secure the repayment of a loan.

 

Combined Loan to Value (CLTV) – Sum of all liens on the property divided by the value of the property.

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