Glossary of Terms

Following are mortgage and real estate related terms and definitions you may find helpful.

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Late charge: The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.

Lease: A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.

Leasehold estate: A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.

Legal description: A property description, recognized by law that is sufficient to locate and identify the property without oral testimony.

Lender: An institution that makes loans to borrowers on real estate.

Liabilities: A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

Liability insurance: Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.

Lien: A claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don't make the mortgage payments.

A legal claim against a property that must be paid when the property is sold.

Lifetime Cap: A provision of an ARM that limits the total increase in interest rates over the life of the loan.

Lifetime payment cap: For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage.

Line of credit: An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.

Liquid asset: A cash asset or an asset that is easily converted into cash.

Loan: A sum of borrowed money (principal) that is generally repaid with interest.

Loan Commitment: Formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.

Loan Origination: The process by which a mortgage lender brings into existence a mortgage secured by real property.

Loan origination fees: Fees paid to your mortgage lender for processing the mortgage application. This fee is usually in the form of points. One point equals 1% of the mortgage amount.

Loan Servicing: The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

Loan -To-Value: (LTV). The loan-to-value ratio (LTV) is the original loan amount divided by the lower of the sales price or the appraised value.

Lock: The period, expressed in days, during which a lender will guarantee a rate.

Lock-in period: The time period during which the lender has guaranteed an interest rate to a borrower.

Lock-In Rate: A written agreement guaranteeing a specific mortgage interest rate for a certain amount of time.

Low-Down-Payment Feature: A feature of some mortgages, usually fixed-rate mortgages, that helps you buy a home with as little as a 3% down payment.

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