Definition
A term sheet is the lender's written outline of the loan it is prepared to consider: amount, rate structure, term, amortization, the maximum loan-to-value, the minimum coverage, and the conditions that follow. It is a basis for negotiation rather than a commitment, and the tests printed on it are what actually size the loan.
How to read it
How to read it
- Up to is the operative phrase. The percentage is a ceiling, and the loan is the smallest of the tests printed beside it.
- A term sheet is not a commitment letter. It is the shape of a conversation, and it expires with the market that priced it.
- The useful question to ask of one is which test binds at today's rate.
- Two sheets are rarely comparable line by line. The cheaper rate can be the smaller loan.
Related terms
Related terms
All termsFinance
DSCR (Debt Service Coverage Ratio)
The debt service coverage ratio is net operating income divided by the annual loan payment.
FinanceLTV (Loan-to-Value)
Loan-to-value is the loan amount divided by the property's value.
FinanceDebt Yield
Debt yield is net operating income divided by the loan amount.
Terms arrive with the writing.
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