Commercial Real Estate & Mortgage Glossary of Terms
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A
The gradual repayment of a loan through regular payments of principal and interest over time.
Appraisal
A professional assessment of a property’s market value, used by lenders to determine loan amounts and risk.
B
A large, lump-sum payment due at the end of a loan term, often following smaller monthly payments.
Bridge Loan
A short-term loan used to finance the purchase or development of a property until permanent financing is secured.
C
A metric used to estimate the return on a real estate investment, calculated as Net Operating Income divided by property value.
Cash Flow
The net income generated from a property after operating expenses and debt service have been paid.
Closing Costs
Fees and expenses incurred during the finalization of a real estate transaction, including appraisal, title, and legal fees.
Commercial Property
Real estate intended for business use, such as office buildings, retail spaces, multifamily units, or warehouses.
D
The total amount required to repay loan principal and interest over a specific period.
Debt Service Coverage Ratio (DSCR)
A ratio used by lenders to measure a property’s ability to cover debt payments, calculated as Net Operating Income divided by debt service.
E
The portion of a property’s value that the owner actually owns, calculated as market value minus outstanding debt.
Escrow
A financial arrangement in which a neutral third party holds funds or documents until agreed-upon conditions are met.
F
A loan with an interest rate that remains constant throughout the term of the loan.
Foreclosure
A legal process in which a lender takes ownership of a property due to loan default by the borrower.
G
Total income generated by a property before expenses are deducted.
Gross Rent Multiplier (GRM)
A valuation metric calculated by dividing a property’s price by its gross rental income.
H
A loan where the borrower pays only interest for a specified period before principal repayment begins.
Internal Rate of Return (IRR)
A measure of the expected profitability of an investment, factoring in the time value of money.
L
A percentage that represents the amount of the loan compared to the property’s appraised value.
Leasehold Interest
A tenant’s right to use and occupy real estate for a set term under a lease agreement.
M
The estimated price a property would sell for in a competitive and open market.
Mixed-Use Property
A development that combines residential, commercial, and sometimes industrial uses in a single project.
N
The income a property generates after subtracting all operating expenses, excluding debt payments and taxes.
P
A preliminary evaluation of a borrower’s creditworthiness and borrowing capacity based on self-reported information.
Principal
The original loan amount borrowed, excluding interest.
T
A non-binding document that outlines the basic terms and conditions of a proposed loan.
Title Insurance
A policy protecting the buyer or lender from financial loss due to defects in the property’s title.
U
The process by which lenders assess the risk of lending, reviewing the borrower’s credit, income, assets, and the property value.
