DSCR (Debt Service Coverage Ratio)
Net operating income divided by annual debt service. Most banks require 1.20x–1.25x on commercial real estate; below those levels, loan proceeds get cut or the deal moves to bridge or structured capital. The single most decisive number in commercial mortgage underwriting.
Go deeper →Debt Yield
Net operating income divided by the loan amount, expressed as a percentage. Lenders — CMBS especially — use it as a leverage test immune to rate and amortization games; 8%–10% minimums are common. A 9% debt yield means the lender earns its money back in roughly 11 years of NOI.
LTV (Loan-to-Value)
The loan amount divided by the appraised value. Most commercial permanent loans cap at 65%–75% LTV depending on asset class and lender type; the appraisal — not the purchase price or the owner's opinion — sets the denominator.
Go deeper →LTC (Loan-to-Cost)
The loan amount divided by total project cost, used on construction and value-add deals where there is no stabilized value yet. Construction lenders typically fund 65%–75% of cost, with the sponsor's equity making up the difference.
Go deeper →NOI (Net Operating Income)
Property revenue minus operating expenses, before debt service and capital expenditures. The underwritten NOI — after a lender applies its own vacancy, management, and reserve assumptions — is what actually sizes your loan, and it is usually lower than the owner's version.
T12 (Trailing Twelve Months)
A month-by-month operating statement covering the last twelve months. Lenders read it for trend, seasonality, and one-time items; reconciling it to the rent roll is the first credibility test every package faces.
Go deeper →Cap Rate
Net operating income divided by property value. The market's pricing shorthand: a $1MM NOI at a 6% cap implies a $16.7MM value. Appraisers select cap rates from comparable sales, which makes cap-rate support a core battleground in valuation disputes.
Rent Roll
The tenant-by-tenant schedule of leases: names, square footage or unit type, rent, commencement, expiration, and options. Lenders underwrite rollover risk directly from it — expirations inside the loan term are analyzed as potential vacancy.
Term Sheet
A lender's non-binding summary of proposed loan terms: proceeds, rate, amortization, recourse, reserves, fees, and conditions. Competing term sheets are compared line by line — never by rate alone — and negotiated before application.
Non-Recourse
A loan where the lender's remedy is limited to the property, not the borrower's other assets — subject to bad-boy carveouts. Standard on CMBS, agency, and many debt-fund loans; banks typically require some recourse in exchange for better pricing.
Bad-Boy Carveouts
The exceptions to non-recourse: fraud, misapplication of funds, unauthorized transfers, bankruptcy filings, and similar acts convert the loan to full recourse against the guarantor. The carveout list is negotiated, and its breadth matters as much as the recourse label.
Recourse
A personal guaranty of repayment from the sponsor. Full recourse exposes the guarantor's assets to any deficiency; partial recourse and burn-off structures (guaranties that step down as the property performs) are negotiated middle grounds.
Bridge Loan
Short-term financing — typically 12 to 36 months, interest-only — for properties in transition: acquisition, lease-up, repositioning, or a maturity that permanent debt can't yet refinance. Priced over SOFR or as a short fixed coupon; sized to the business plan and exit.
Go deeper →Maturity Defense
Bridge capital used to retire a maturing loan and buy 12–36 months for income, the market, or rates to improve before a sale or permanent refinance — the alternative to negotiating with your current lender from a position of no alternatives.
Go deeper →Permanent Loan
Long-term financing — typically 5, 7, or 10-year terms with 25–30 year amortization — for stabilized properties. Provided by banks, credit unions, life companies, agencies, and CMBS, each with different pricing, recourse, and prepayment trade-offs.
Go deeper →CMBS (Commercial Mortgage-Backed Securities)
Loans originated to be pooled and securitized, serviced under rigid pooling agreements rather than by a relationship banker. Maximizes non-recourse proceeds on stabilized assets; unforgiving under stress and expensive to exit before maturity.
Go deeper →Agency Debt
Multifamily loans through Fannie Mae, Freddie Mac, or HUD and their delegated lenders. Standardized underwriting, competitive fixed rates, and non-recourse structure make agency execution the benchmark for stabilized apartment financing.
Life Company Loan
Permanent debt from life insurance companies, typically at conservative leverage (55%–65% LTV) on high-quality assets, rewarded with the tightest pricing and longest fixed terms in the market. Relationship- and quality-driven; not a fit for story deals.
Debt Fund
A private investment fund lending its own discretionary capital, primarily bridge and transitional loans. Faster and more flexible than banks — credit decisions without committee calendars — at a pricing premium; the center of the 2026 bridge market.
Preferred Equity
An investment between senior debt and common equity: priority return (often low-to-mid teens all-in), no lien, and control rights that trigger on underperformance. The standard tool when senior proceeds fall short of the capital need.
Go deeper →Mezzanine Debt
A loan secured by a pledge of the ownership entity rather than the property itself, sitting behind the senior mortgage. Functionally similar to preferred equity in the capital stack; the senior lender's intercreditor preferences usually decide which one a deal uses.
Go deeper →Interest Reserve
Loan proceeds escrowed at closing to pay the loan's own interest during construction or lease-up, sized to carry the property until income arrives. Standard on construction and heavier bridge deals; it is your money, budgeted honestly.
TI/LC Reserves
Escrows for tenant improvements and leasing commissions — the capital it takes to re-lease space as leases roll. Lenders size them from the rent roll's expiration schedule; heavy near-term rollover means heavy reserves and lower effective proceeds.
Reconsideration of Value (ROV)
A formal, documented request — submitted through the lender — asking an appraiser to revisit specific elements of a report: internal inconsistencies, omitted comparables, factual errors. Wins on documented error, not disagreement; typically moves value modestly.
Go deeper →Phase I Environmental
The standard environmental site assessment: a records-and-inspection review for contamination risk. A clean Phase I closes the issue; findings trigger a Phase II with sampling — weeks of delay and a genuine deal risk on properties with industrial or dry-cleaning history.
Estoppel Certificate
A tenant's signed confirmation of its lease terms — rent, term, options, defaults, and claims. Lenders require them from major tenants before closing; slow tenant response is one of the most common causes of closing delays.
Defeasance & Yield Maintenance
The two expensive ways out of fixed-rate debt before maturity. Yield maintenance is a penalty making the lender whole on lost interest; defeasance (standard in CMBS) replaces the collateral with securities. Both can cost more than owners expect — read the prepay clause before you sign, not before you sell.