Glossary
Core US commercial multifamily financing terms used across our guides, tools, and market pages for 5+ unit properties.
A-C
Amortization: The schedule for principal repayment over the life of a loan.
Bridge Loan: Shorter-term financing commonly used for transitional multifamily business plans.
Cap Rate: Net operating income divided by value or purchase price, expressed as a percentage.
Cash-on-Cash Return: Annual pre-tax cash flow divided by invested equity.
CMBS: Commercial mortgage-backed securities financing, often used for stabilized commercial assets.
D-F
Debt Service: Total principal and interest payments required by the loan structure.
Debt Service Coverage Ratio (DSCR): NOI divided by annual debt service; a core lender sizing metric.
Debt Yield: NOI divided by loan amount; a lender risk metric independent of interest rate.
Effective Gross Income: Scheduled income minus vacancy/credit loss plus other property income.
Exit Cap Rate: Assumed cap rate at refinance or sale used for sensitivity testing and valuation planning.
G-N
Guarantor: Individual or entity providing credit support to the borrowing structure.
In-Place NOI: NOI based on current operating performance before stabilization assumptions.
Interest Rate Cap: A derivative that limits floating-rate exposure on variable-rate debt.
LTV (Loan-to-Value): Loan amount divided by collateral value.
NOI (Net Operating Income): Property income minus operating expenses, before debt service and capital items.
O-S
Prepayment Penalty: Cost to pay off debt early, often including yield maintenance or defeasance provisions.
Recourse: Lender ability to pursue guarantor assets beyond collateral under specified conditions.
Reserve Account: Escrowed funds for taxes, insurance, repairs, or replacement needs.
Seasoning: Operating history lenders require after acquisition or recap before approving certain refinance or cash-out terms.
Single-Purpose Entity (SPE): Borrowing entity structured to hold one asset with segregated accounts and limited cross-collateralization.
Stabilized NOI: NOI after business-plan improvements are completed and operations normalize.
Sponsorship: The borrower team and guarantor group assessed for experience, liquidity, and governance.
T-Z
T12: Trailing 12-month operating statement used to evaluate recent financial performance.
Term Sheet: Preliminary financing proposal outlining pricing, proceeds, covenants, and key conditions.
Underwriting: The lender process of evaluating cash flow, collateral, sponsorship, and risk.
Value-Add: Strategy focused on operational or capital improvements to increase NOI and value.
Yield Maintenance: Prepayment structure intended to preserve lender yield if a loan is repaid early.