Commercial real estate finance glossary

Amortization is the schedule on which a loan's principal is repaid through regular payments. A 30-year amortization spreads repayment over 360 months, and a loan can have a shorter term than its amortization, which leaves a balloon payment at maturity.

Loan termsTry the calculatorSee also: Balloon payment, Interest-only period, Loan constant

An assisted living facility is a residential community that provides help with daily activities such as bathing, dressing and medication, without the round-the-clock nursing care of a skilled nursing facility. In California most are licensed as residential care facilities for the elderly.

Property typesRead about the programSee also: RCFE, Memory care, SNF

Average daily rate is a hotel's rooms revenue divided by the number of rooms sold. It measures price, while occupancy measures volume; multiplied together they give RevPAR.

Property typesTry the calculatorSee also: RevPAR, Debt yield

A balloon payment is the unpaid principal due in one lump sum when a loan matures, because the amortization is longer than the term. A loan with a 10-year term and 30-year amortization has a balloon at the end of year ten, which the borrower normally repays by refinancing or selling.

Loan termsSee also: Amortization, Bridge loan

A bridge loan is short-term financing, often interest-only and floating-rate, that covers a property until it can be refinanced into permanent debt or sold. Typical uses are acquisition, renovation and lease-up before a refinance into HUD, agency or bank debt.

ProgramsRead about the programSee also: PIP, SOFR, Stabilization, Interest-only period

A capitalization rate is a property's annual net operating income divided by its value or price. It is a quick measure of the income return an unleveraged buyer earns, and lenders use it to estimate value when an appraisal is not yet available.

UnderwritingSee also: NOI, LTV, Debt yield

A cash-out refinance replaces an existing loan with a larger one and pays the difference to the borrower. Programs often allow less leverage on cash-out than on a rate-and-term refinance; for example, Corin's HUD 223(f) assumptions cap cash-out at 80% loan-to-value.

Loan termsSee also: LTV, HUD 223(f)

A Certified Development Company is a nonprofit lender certified by the U.S. Small Business Administration to deliver the SBA 504 program in its region. The CDC makes the second-lien loan, funded by an SBA-backed debenture, alongside a bank's first-lien loan.

ProgramsRead about the programSee also: SBA 504 loan, SBA debenture, Equity injection

Commercial mortgage-backed securities are bonds backed by a pool of commercial mortgages. A CMBS (conduit) loan is originated to be pooled, is usually non-recourse apart from standard carve-outs, and is typically fixed-rate. Corin's hotel assumptions are a 10-year term, 30-year amortization, up to 65% loan-to-value and a minimum 1.40x coverage.

ProgramsRead about the programSee also: Defeasance, Debt yield, Non-recourse loan

A construction loan is short-term financing that funds the building or substantial renovation of a property, sized on the lesser of loan-to-cost and the value once complete. The lender controls the money and releases it as work progresses; Corin arranges these loans but has no role in disbursements.

ProgramsRead about the programSee also: LTC, Interest reserve, LTARV

Debt service coverage ratio is annual net operating income divided by annual loan payments. A ratio of 1.25x means income is 125% of the payment. Corin's sizing assumptions use 1.15x for HUD market-rate multifamily, 1.25x for agency multifamily, 1.25x for SBA, 1.45x for HUD Section 232 and 1.40x for hotel CMBS.

UnderwritingTry the calculatorSee also: NOI, Debt yield, Loan constant

Debt yield is a property's annual net operating income divided by the loan amount. Unlike coverage, it does not depend on the interest rate or amortization, so lenders use it as a second check on how much income stands behind each dollar of loan.

UnderwritingTry the calculatorSee also: DSCR, NOI, CMBS

Defeasance is a way to prepay a CMBS loan by replacing the property as collateral with a portfolio of U.S. Treasury securities that produces the same payments. The borrower pays for the securities, so the cost rises as interest rates fall.

Loan termsSee also: Yield maintenance, CMBS, Prepayment penalty

An equity injection is the cash a borrower must put into a project. For SBA 504, Corin's assumptions use 10% as a base, 5% more for special-purpose property such as hotels and care facilities, and 5% more for a start-up or new construction.

ProgramsTry the calculatorSee also: SBA 504 loan, LTC

Fannie Mae multifamily loans are made by lenders authorized under the Delegated Underwriting and Servicing (DUS) program and sold to Fannie Mae. Corin's small-balance assumptions are up to 80% loan-to-value and 1.25x coverage with a 30-year amortization; real deals often land at lower leverage because coverage binds.

ProgramsRead about the programSee also: Freddie Mac multifamily, DSCR, LTV

An FF&E reserve is money set aside each year, usually a percentage of hotel revenue, to replace furniture, fixtures and equipment. Lenders deduct it from income when they calculate the net operating income they underwrite.

Property typesSee also: NOI, PIP

Freddie Mac multifamily loans are made by Optigo network lenders and purchased by Freddie Mac. Like Fannie Mae, they are long-term, fixed-rate or floating-rate loans on stabilized apartment properties, with pricing set over Treasury or SOFR.

ProgramsRead about the programSee also: DUS, DSCR

A hard money loan is a short-term, asset-based loan from a private lender, underwritten mainly on the property's value and the exit plan rather than the borrower's income. Rates, points and fees are higher than bank or agency debt in exchange for speed and flexibility. Private lenders fund as lender of record.

ProgramsRead about the programSee also: Bridge loan, LTARV, Interest-only period

HUD Section 221(d)(4) is an FHA-insured loan for new construction or substantial rehabilitation of multifamily housing with five or more units. Corin's assumptions are 87% loan-to-cost and 1.15x for market-rate projects, a 40-year term, and Davis-Bacon prevailing wages during construction.

ProgramsRead about the programSee also: HUD 223(f), MIP, LTC

HUD Section 223(a)(7) is a streamlined refinance of an existing FHA-insured loan. The new principal is capped by the original insured amount and the unpaid balance plus eligible costs, and the borrower's new payment may not exceed the current one.

ProgramsRead about the programSee also: HUD 223(f), MIP

HUD Section 223(f) is an FHA-insured, fixed-rate, fully amortizing loan to purchase or refinance an existing apartment property (or, under Section 232, a care facility). For market-rate multifamily Corin's assumptions are 87% loan-to-value, 1.15x coverage and a 35-year term (HUD Mortgagee Letter 2025-03).

ProgramsRead about the programSee also: MIP, HUD Section 232, HUD 221(d)(4), DSCR

HUD Section 232 is the FHA program that insures loans on skilled nursing facilities, assisted living, residential care and board-and-care homes. Corin's refinance assumptions are 80% loan-to-value, 1.45x coverage and a 35-year term. Section 232 was not changed by Mortgagee Letter 2025-03.

ProgramsRead about the programSee also: MIP, SNF, RCFE, Assisted living facility

An interest reserve is a portion of a construction or bridge loan set aside to pay the loan's own interest while the property is built or leased up. The lender holds and applies the reserve; it is sized into the loan, so it increases the amount borrowed.

Loan termsSee also: Construction loan, Stabilization, LTC

An interest-only period is a stretch of the loan, often the first one to five years, when the borrower pays interest but no principal. Payments are lower during the period and rise when amortization starts. Lenders often test coverage on the amortizing payment as well.

Loan termsSee also: Amortization, DSCR, Bridge loan

A loan constant is the annual debt service on a loan divided by the loan amount. A 6.00% loan amortized over 30 years has a constant of about 7.19%. Dividing income by the required coverage and then by the constant gives the largest loan the income supports.

UnderwritingTry the calculatorSee also: DSCR, Amortization

Loan to after-repair value is the loan amount divided by the property's projected value once planned renovations are finished. Fix-and-flip and bridge lenders use it alongside loan-to-cost, and usually lend the lesser of the two.

UnderwritingRead about the programSee also: LTV, LTC, Hard money loan

Loan to cost is the loan amount divided by the total project cost, including land, construction and soft costs. HUD 221(d)(4) market-rate loans in Corin's assumptions go to 87% of cost, and construction lenders also test the loan against value when complete.

UnderwritingSee also: LTV, LTARV, Construction loan

Loan to value is the loan amount divided by the property's appraised value or purchase price, whichever the lender uses. A lower ratio means more borrower equity and less risk to the lender, so programs set a maximum.

UnderwritingSee also: LTC, LTARV, Cap rate

Memory care is specialized housing and support for people with Alzheimer's disease or other forms of dementia, usually in a secured setting with trained staff. In California it is typically provided within a licensed residential care facility for the elderly.

Property typesRead about the programSee also: RCFE, Assisted living facility, HUD Section 232

Mezzanine debt is a loan secured by a pledge of the ownership interests in the borrower rather than by a lien on the real property. It sits behind the senior mortgage and costs more, and because it is not secured by real property it raises different California regulatory questions, so counsel should review any structure that includes it.

Loan termsSee also: Preferred equity, LTV

The mortgage insurance premium is the fee for FHA insurance on a HUD loan, paid upfront and as an annual percentage of the average outstanding balance. Corin's assumptions use a flat 0.25% annual premium for HUD multifamily applications on or after 2025-10-01; green certification no longer lowers it.

ProgramsTry the calculatorSee also: HUD 223(f), HUD 221(d)(4), HUD Section 232

A Mortgage Loan Disclosure Statement (DRE form RE 882) is the written disclosure a California real estate broker gives a borrower on a loan the broker arranges that is secured by real property. It sets out estimated costs, the broker's compensation and the loan terms. On every loan Corin arranges that is secured by real property, you receive a Mortgage Loan Disclosure Statement (DRE form RE 882) no later than three business days after we receive your completed written loan application, and in every case before you become obligated on the loan.

CaliforniaSee also: Real estate broker (loan broker), Term sheet

Net operating income is a property's income from rents and other operations less its operating expenses, before debt service, income taxes and depreciation. Lenders re-underwrite it, adjusting vacancy, management fees and reserves, before they size a loan.

UnderwritingSee also: DSCR, Cap rate, Debt yield, FF&E reserve

A non-recourse loan limits the lender's remedy on default to the property that secures it, so the borrower is not personally liable for the balance. Standard carve-outs, often called bad-boy guaranties, make a guarantor liable for acts such as fraud, misapplied funds or voluntary bankruptcy. Programs such as HUD and CMBS are non-recourse with carve-outs; SBA loans require personal guaranties.

Loan termsSee also: CMBS, HUD Section 232, SBA 504 loan

Preferred equity is an investment in the borrower's ownership that is paid before common equity. It fills the gap between senior debt and the sponsor's equity and, unlike a mortgage, is not secured by a lien on the real property.

Loan termsSee also: Mezzanine debt, LTC

A prepayment penalty is a fee for repaying a loan before maturity. Common forms are a declining percentage (for example 5-4-3-2-1), yield maintenance and defeasance. Bridge loans often use a minimum interest period instead.

Loan termsSee also: Yield maintenance, Defeasance

A property improvement plan is the list of renovations a hotel franchisor requires when a property changes hands, is renewed or converts to a new brand. A PIP bridge loan funds the purchase and the planned renovations together, sized on cost, until the hotel can refinance.

Property typesRead about the programSee also: Bridge loan, FF&E reserve, RevPAR

Proposition 13 limits California property tax to about 1% of assessed value plus local charges that voters have authorized, and caps annual growth in assessed value at 2%. A sale or other change in ownership resets the assessed value to the purchase price, so a buyer's tax bill can be much higher than the seller's, which lenders account for in underwriting.

CaliforniaSee also: NOI, AB 1482

A real estate broker who arranges loans is a licensed intermediary who negotiates a loan between a borrower and a lender for compensation. The broker does not make the loan, fund it or service it; the lender makes the credit decision and funds as lender of record. In California the broker must hold a real estate broker license from the Department of Real Estate.

CaliforniaSee also: MLDS, Term sheet

Rent stabilization is a local law, such as the City of Los Angeles Rent Stabilization Ordinance, that limits annual rent increases on covered units. It applies in addition to, or instead of, the statewide cap in AB 1482, and the local cap is usually lower, so lenders underwrite rents and growth by jurisdiction.

CaliforniaSee also: AB 1482, NOI

A residential care facility for the elderly is a California licensed home or community, regulated by the Department of Social Services, that provides room, board and help with daily activities to people age 60 and over. Assisted living and memory care in California are generally licensed as RCFEs.

Property typesRead about the programSee also: Assisted living facility, Memory care, HUD Section 232

Revenue per available room is a hotel's rooms revenue divided by the number of rooms available, which equals average daily rate multiplied by occupancy. It is the standard measure of a hotel's performance against its competitive set.

Property typesTry the calculatorSee also: ADR, NOI, Debt yield

An SBA 504 loan is a fixed-rate loan for owner-occupied commercial real estate, structured as a bank first lien of about 50% of the project, a CDC debenture for most of the rest, and borrower equity. The operating business must occupy at least 51% of the property, and owners of 20% or more give personal guaranties.

ProgramsRead about the programSee also: CDC, SBA debenture, Equity injection, SBA 7(a) loan

An SBA 7(a) loan is a bank loan partly backed by a U.S. Small Business Administration guaranty, usually floating-rate and tied to Prime. It can finance real estate, working capital or a business purchase, and can be combined with a 504 loan in a stack; Corin models combined SBA exposure up to $10M for that structure.

ProgramsRead about the programSee also: SBA 504 loan, Equity injection

A debenture is the bond sold to investors to fund the SBA 504 second-lien loan made by a Certified Development Company. Its rate is fixed for the life of the loan and set when the debenture is sold.

ProgramsTry the calculatorSee also: CDC, SBA 504 loan

The Secured Overnight Financing Rate is a benchmark interest rate based on overnight Treasury repurchase transactions, published by the Federal Reserve Bank of New York. Floating-rate bridge and construction loans are usually priced as SOFR plus a spread.

UnderwritingSee also: Bridge loan, Interest-only period

A skilled nursing facility provides round-the-clock nursing and medical care, often reimbursed by Medicare and Medicaid. Revenue depends heavily on payor mix, so lenders underwrite census and the mix of private-pay, Medicare and Medicaid residents alongside income.

Property typesRead about the programSee also: HUD Section 232, Assisted living facility

Stabilization is the point at which a property reaches the occupancy and income a permanent lender will underwrite, for example 85% occupancy held for several months at a senior living community. Bridge and construction loans are sized to be repaid by a refinance once the property stabilizes.

UnderwritingSee also: Bridge loan, Interest reserve, NOI

AB 1482 is the California statute (Civil Code section 1947.12) that limits annual rent increases on covered residential units to 5% plus the regional change in the Consumer Price Index, capped at 10%. It also requires just cause to evict after 12 months of tenancy. Units whose certificate of occupancy is less than 15 years old are exempt on a rolling basis, and the statute is scheduled to sunset on 2030-01-01 unless extended.

CaliforniaSee also: Rent stabilization, Prop 13

A term sheet is a lender's summary of the proposed loan: amount, rate, term, amortization, fees, reserves, recourse and conditions. It is usually not binding on the lender until a commitment is issued, and comparing term sheets means comparing all-in cost, not just the interest rate.

Loan termsSee also: Real estate broker (loan broker), Loan constant

Yield maintenance is a prepayment premium that compensates a lender for the interest it loses when a fixed-rate loan is repaid early. It is calculated from the difference between the loan's rate and a Treasury yield, and it shrinks as the loan ages.

Loan termsSee also: Defeasance, Prepayment penalty