Commercial Mortgage Quick Reference Guide
Skin In The Game
This is probably one of the most common terms in commercial mortgage lingo, and really is used in most financial scenarios where debt is being procured. Skin in the game references how much actual cash the borrower has invested in a deal. For example to acquire a property for perhaps one million dollars, the bank may look for a down payment of 20% in cash. This is different from equity where perhaps an investor scoops up a property "on the cheap," and is such awarded instant equity. Skin is a borrower's cash out of his own pocket, and is seen as a real commitment to a project, thereby making an investor more comfortable with putting their own cash in behind it.