A term sheet can feel like it's written in another language. But most of it comes down to a handful of ratios and terms that decide how much you can borrow, what it costs, and how risky the loan is for everyone involved. Here's a plain-English guide to the ones that matter most.

One thing our founder, a finance professor, says often: clients who understand their financing make better decisions, prepare stronger files, and avoid costly mistakes. You don't need to become a credit analyst. You just need to understand what the lender is looking at and why.

LTV — Loan-to-Value

LTV is the size of the loan compared to the value of the asset. Borrow $700,000 against a property worth $1,000,000 and your LTV is 70%. It answers the lender's first question: if something goes wrong, how much cushion is there between the loan and the value backing it? Lower LTV means less risk for the lender — and usually better terms for you. A higher LTV stretches your equity further but typically costs more, because the lender has less margin for error.

DSCR — Debt-Service Coverage Ratio

DSCR compares the income an asset produces to the debt payments it has to make. If a property generates $125,000 in net operating income and owes $100,000 in annual debt service, the DSCR is 1.25x — meaning it earns 25% more than it needs to cover the loan. Most lenders want to see a cushion above 1.0x, because a ratio at or below that line means there's no room for a vacancy, a repair, or a soft month. DSCR is, in plain terms, the lender's measure of whether the deal can comfortably pay for itself.

You don't need to become a credit analyst. You need to understand what the lender is looking at — and why.

Points, rate, and amortization

Three more terms shape what a loan actually costs:

  • Points are upfront fees, each equal to 1% of the loan amount. Two points on a $1,000,000 loan is $20,000 paid at closing. Sometimes you can trade points for a lower rate — worth modeling against how long you'll hold the loan.
  • Interest rate is the ongoing cost, fixed or floating. The headline number matters, but so does whether it can move on you.
  • Amortization is the schedule over which you repay principal. A loan can have a long amortization (smaller payments) but a shorter term, leaving a balloon payment due at the end — a detail that surprises borrowers who only looked at the monthly figure.

How they fit together

No single number tells the story. A low rate paired with a high LTV and thin coverage can be riskier than a slightly higher rate on a conservative structure. The point of understanding these terms isn't to memorize formulas — it's so that when you compare two offers, you're comparing the things that actually matter, not just the rate on the front page. That's a conversation we're always happy to walk through.

Examples above are illustrative and simplified for explanation; actual terms vary by lender, asset, and borrower. Nothing herein is an offer to sell or a solicitation of an offer to buy any security, nor is it investment, legal, or tax advice. See our Disclosures.