Hard Money and Fix-and-Flip Glossary

Terms, A to Z

After-repair value (ARV): The estimated market value of a property once the planned renovation is finished, usually supported by comparable sales. Investors use it to size a project, and lenders use it to judge the exit. The Illinois Lender deal form asks for it as an optional field.
Attorney review period: A short period after a purchase contract is signed, set by the contract, in which each side's attorney can review it and propose changes. It is a standard part of many Illinois residential purchase contracts.
Bridge loan: Short-term financing that covers the gap until a longer-term outcome, such as a sale or a refinance. Illinois Lender makes bridge loans for a purchase, a refinance, or a cash-out when renovation is not the main purpose.
Business-purpose loan: A loan made for a business or investment purpose rather than personal, family, or household use. Every Illinois Lender loan is business-purpose; see who it is for.
Cash-outAlso: cash-out refinance: A loan on a property the investor already owns that is larger than the existing debt, freeing up equity as cash. Illinois Lender offers cash-out on investment property only, as one of its bridge loans.
Comparable salesAlso: comps: Recent sales of similar properties nearby, used to estimate what a property is worth. Comps are the usual support for an after-repair value. They are on the list of what to have ready.
Exit strategyAlso: exit: How a short-term loan will be repaid: usually by selling the property or by refinancing it, for example into a rental loan. Illinois Lender reviews the exit at the first look.
Fix-and-flip loanAlso: rehab loan, purchase-and-rehab loan: A short-term investment property loan that combines purchase money and renovation money, repaid when the property is sold or refinanced after the work. Illinois Lender's fix-and-flip loans release the renovation money in rehab draws.
Hard money loan: A short-term loan from a private, non-bank lender, secured by real estate and underwritten mainly on the property and the borrower's plan to repay it. Illinois Lender's fix-and-flip and bridge loans are what investors commonly call hard money. See hard money vs. a bank loan.
Interest rateAlso: rate: The price of borrowing, charged on the loan balance and usually stated as a yearly percentage. Illinois Lender doesn't publish a rate. It's set for each deal and shown on the term sheet (why no published rate).
Liquidity: Cash, and assets that can be turned into cash without a large loss in value. Lenders look at liquidity to see whether a borrower can cover costs beyond the loan itself. It is one of the borrower items in underwriting.
Loan-to-value (LTV): The loan amount compared with the property's value, used by lenders to measure leverage. Illinois Lender doesn't publish loan-to-value limits. Leverage is set for each deal.
Non-owner-occupied propertyAlso: investment property: Real estate the borrower holds as an investment and does not live in. Illinois Lender lends only on non-owner-occupied investment property, never on a home the borrower lives in. Read the eligibility answers.
Payoff statementAlso: payoff letter: A statement from a borrower's current lender showing the amount needed to pay an existing loan off in full on a given date, including interest and any fees. A refinance or cash-out needs one to show how much of the new loan goes to the old one.
PointsAlso: origination points: An upfront lender fee expressed as a percentage of the loan amount. Illinois Lender doesn't publish points. They're set for each deal and shown on the term sheet.
Private money loanAlso: private lending: A loan funded by a private lender rather than a bank or credit union. "Private money" and "hard money" are often used interchangeably.
Rehab budgetAlso: scope of work: The itemized plan and cost for the renovation: what will be done and what it will cost. The Illinois Lender deal form asks for it on every deal (zero if there is no work).
Rehab drawAlso: draw, construction draw, rehab holdback: A staged release of renovation funds. Instead of paying the whole rehab budget at closing, the lender holds it back and releases it in draws as work is completed. How draws work at Illinois Lender.
Term sheet: A written summary of proposed loan terms, such as amount, rate, points, fees, and term, issued before the borrower commits. It is a proposal, not final approval. What is on an Illinois Lender term sheet.
TitleAlso: title work: Legal ownership of a property. Title work is the search of public records for liens, unpaid taxes, or other claims against it, so that ownership can transfer or a loan can be secured on a clear footing. It is part of underwriting.
Under contract: A property the buyer has a signed purchase agreement on but does not yet own. Whether to send one to Illinois Lender is answered in the FAQ.
Underwriting: The lender's review of the property, title, borrower, and deal before a loan closes. Every Illinois Lender loan is subject to underwriting; see what it looks at.

Where these terms show up

The six-step process shows where the term sheet, underwriting, and draws fit. The loan pages use the terms in context: fix-and-flip, bridge, cash-out, and first-time flippers. For the lender comparison, see hard money vs. a bank loan.

Hard money and fix-and-flip loan glossary

Terms, A to Z

Where these terms show up

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