# Glossary

**Amortization Term**: The length of time (expressed in months or years) it will take to fully pay off the principal balance of the mortgage

**Bridge Loan**: A form of transitional mortgage that is meant to provide financing for a short period of time (usually 1-3 years). Bridge loans are often more expensive than similarly sized permanent mortgages but can provide higher leverage than a permanent mortgage. A bridge loan is often used to cover the time period during which a property is undergoing renovation, with the expectation that at the end of the bridge’s term the property will have a higher value and will qualify for permanent financing large enough to repay the bridge.

**Day Count Convention**: The day count convention determines how interest accrues each month. The portion of a year that have elapsed (i.e. one month) is known as the coupon and factor; the four most-common ways of completing this calculation are:

__30/360__: every month is assumed to have 30 days, for a total of 360 days (12 * 30) in a year. Every month will have the same accrued interest using this approach.

__Actual/360__: the actual number of elapsed calendar days is used, but this value is divided by 360 to determine the coupon factor.

__Actual/365__: the actual number of elapsed calendar days is used, but this value is divided by 365 to determine the coupon factor.

__Actual/Actual__: the actual number of elapsed calendar days is used, but this value is divided by the actual number of days in the year to determine the coupon factor.

**Debt Service Coverage Ratio (DSCR)**: The ratio of the property’s NOI to annual debt payments (principal + interest). A value of 1.00 means that NOI is exactly equal to debt service. A value less than 1.00 indicates that a property’s NOI is less than its debt service.

**Debt Yield**: The ratio of the property’s NOI to the mortgage amount. A lower debt yield indicates higher leverage and vice-versa.

**Interest Only (IO) Period**: The period of time (expressed in months or years) during which only interest payments are due on a mortgage. After the IO period has ended the loan balance will begin amortizing.

**Loan Term**: The length of time (expressed in months or years) that the mortgage is in effect. At the end of the loan term any remaining balance must be repaid in full to the lender.

**Loan-to-Cost Ratio (LTC)**: The ratio of the mortgage balance to the property’s total cost. The ‘cost’ usually includes transaction and construction expenses. This ratio is typically used when sizing a transitional mortgage, whereas LTV is used when sizing permanent financing.

**Loan-to-Value Ratio (LTV)**: The ratio of the mortgage balance to the property’s value. For acquisition financing, the value of a property is the purchase price. When refinancing a property, its value is determined via an appraisal.

**Net Operating Income (NOI)**: The net cashflow from operations of a given property. This is calculated as the total of all rental and non-rental revenue minus all operating expenses. Capital expenditures are not included in this amount.