Written & reviewed by Stephen A. Sobin, President of Select Commercial Funding LLC
Reference
Commercial Real Estate Loan Glossary
Plain-English definitions of the commercial mortgage terms you will encounter, from cap rate and DSCR to non-recourse and CMBS.
Get a Free QuoteCommercial Real Estate Loan Glossary
- Cap rate
- Net operating income divided by property value; a quick measure of an income property’s yield.
- DSCR
- Debt-service-coverage ratio: net operating income divided by annual debt service. Lenders often look for 1.25 or higher.
- LTV
- Loan-to-value: the loan amount divided by the property value or purchase price.
- NOI
- Net operating income: gross income minus operating expenses, before debt service and income taxes.
- Non-recourse
- A loan where the lender’s remedy is limited to the property, with standard bad-boy carve-outs, so the borrower is not personally liable.
- CMBS / conduit
- Commercial mortgage-backed securities: loans pooled and sold as bonds, typically non-recourse, underwritten to the property.
- DUS
- Delegated Underwriting and Servicing, Fannie Mae’s primary multifamily program.
- Amortization
- The schedule over which a loan is repaid; commercial loans often amortize over 25 to 30 years.
- Balloon
- The remaining balance due at the end of a loan term that is shorter than its amortization.
- Prepayment penalty
- A fee for paying off a loan early, commonly step-down or yield-maintenance.
- Bridge loan
- Short-term, asset-based financing for transitional properties, with a path to permanent debt.
- SBA 504 / 7(a)
- Small Business Administration programs for owner-occupied business real estate, with high leverage.
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