Hard money closings go smoothly when you understand the terms before you sign.
Most investor mistakes come from misunderstanding leverage, fees, reserves, and exit constraints.
This glossary defines the terms that affect your cash-to-close, monthly costs, and payoff math.
If you understand these terms, you can compare offers properly and avoid surprises.
The goal is not to memorize jargon. The goal is to control the economics of the deal.
Use this glossary as your reference before you commit.
At a glance
- Points and rate are different costs
- LTV [Loan-to-Value] and LTC [Loan-to-Cost] control leverage and risk
- ARV [After Repair Value] must be supported by comps
- DSCR [Debt Service Coverage Ratio] matters for rental refinance exits
- Reserves and fees change cash-to-close materially
- Exit terms and payoff rules can change total cost
Glossary (plain English)
ARV [After Repair Value]
Estimated market value after renovations are complete.
LTV [Loan-to-Value]
Loan amount divided by the value used in underwriting (as-is or ARV depending on the product).
LTC [Loan-to-Cost]
Loan amount divided by total project cost basis (often purchase plus rehab).
Points
Origination fee, typically a percentage of the loan amount, paid at closing.
Interest rate
Ongoing cost of borrowing, typically paid monthly (often interest-only).
Interest-only
Payment structure where you pay interest during the term without paying down principal.
Draws
Staged releases of rehab or construction funds tied to completed work.
BPO [Broker Price Opinion]
A valuation opinion prepared by a licensed real estate professional using comps and market data.
Appraisal
A valuation report prepared by a licensed appraiser.
Reserves
Funds set aside to cover interest, taxes, insurance, or other risk controls.
DSCR [Debt Service Coverage Ratio]
Rental underwriting metric: property income relative to debt obligation.
Prepayment penalty / minimum interest
Payoff rules that increase cost if you exit early.
Extension
An added period to the loan term, often with fees and conditions.
Escrow
Neutral third party coordinating transaction documents and funds.
Title
Ownership verification and lien discovery; required to insure lender position.
Why this glossary matters for “real cost”
Two loans can look similar but behave very differently in total dollars depending on:
- points
- payoff rules
- reserves
- draw process
- third-party costs
- timeline risk
Understanding terminology is how you control the real economics.
Next step
Hard money program: https://ambitionlending.co/hard-money-loans/
FAQ: https://ambitionlending.co/faq/
Submit a deal: https://ambitionlending.co/contact/
Frequently Asked Questions
What is the most misunderstood hard money term?
“Points.” Many borrowers confuse points with interest. Points are an upfront fee; interest is ongoing.
What leverage metric matters most: LTV or LTC?
It depends on the product and scenario. Investors should understand both because both affect cash needs and risk.
Why does ARV [After Repair Value] matter so much?
Because ARV drives leverage and risk on value-add deals. Inflated ARV creates financing and exit problems.
What term affects exit flexibility the most?
Payoff rules: prepayment penalties, minimum interest, and extension terms can change exit economics materially.
What should I ask before closing?
Ask for a fee worksheet, payoff rules, draw process, and all conditions to close in writing.
How do I avoid surprises?
Understand the terms, model total dollars over a conservative timeline, and submit complete documentation upfront.
