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Realty and Mortgage Terms and Definitions



Laches - Undue delay or negligence in asserting one's legal rights.

Land - Any part of the surface of the earth.

Land Banking - The business of buying land that is not currently needed for use.

Land Contract - A property installment selling agreement whereby the purchaser may occupy and use the land, but no deed is given by the seller until a specified part of the sales price has been paid.

Late Charge - The penalty a borrower must pay when a payment is made after the stated due date.

Late Payment - A payment made later than agreed upon in a credit contract and on which additional charges may be imposed.

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

Lease-purchase Mortgage Loan - A creative financing option that allows homebuyers to lease a home with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance, plus an extra amount that is deposited into a savings account created for a down payment.

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

Legal Description - A legal property description that is sufficient to locate and identify the property without verbal testimony.

Lender - The bank, mortgage broker, or financial institution providing the loan funds to a borrower.

Lender Fees - Fees that are kept by the lender to cover some of their expenses and to meet their profitability goals.  Typically fees such as origination fees, discount points, processing/administration fees, underwriting fees and document preparation fees are lender fees.  This is the area of fees that you should compare very closely from lender to lender before making a decision.

Lessee - A person or company that signs a lease to get temporary use of property.

Lessor - A person or company that provides temporary use of property usually in return for periodic payment.

Leveraging - Putting down the minimum down payment on a piece of property and financing the largest percentage possible.

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

Liability Insurance - An insurance policy that offers protection against claims that a property owner's negligence resulted in bodily injury or property damage to another party.

Liability on an Account - Legal responsibility to repay debt.

LIBOR - See London Inter-bank Offered Rate.

Lien - A loan secured by real estate.  An encumbrance against a property for money due.  The lien can be voluntary such as a mortgage or involuntarily such as a judgement.

Lien Certificate - A certificate to verify there are no claims by one person on the property of another as security for money owed.

Lien Waiver - A disclosure that there are no liens on a piece of property. Usually signed by the seller at closing.

Lifetime Interest Rate Cap - On an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the term of the loan.

Lifetime Payment Cap - On an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the term of the loan.

Line of Credit - An agreement by a financial institution to extend credit up to a certain amount for a certain time to a specified borrower.

Liquid Asset - An asset that is easily converted into cash.

Loan - Borrowed money that is usually repaid with interest.

Loan Commitment - A written offer from a lender to provide financing to a borrower.  The commitment letter states the terms under which the lender agrees to provide financing to the borrower.  Also called a commitment letter.

Loan Origination - The process by which a mortgage lender creates a mortgage secured by real property.

Loan Origination Fee - Fee charged by a lender to process a loan. Usually one percent of the loan amount, though when interest rates are favorable, the percentage can be reduced.

Loan Term - The number of months that you will make monthly payments.  If the loan term is the same as the payment calculation term, you will pay the loan in full during the loan term and no balance will be due.  If the payment calculation term is greater than the loan term, a balance or "balloon payment" may be due at the end of the loan term.

Loan to Value Ratio (LTV) - A ratio used by lenders to calculate the loan amount requested as a percentage of the value of a home.  To determine the loan to value ratio, divide the loan amount by the home's value.  The LTV ratio is used to determine what loan types the borrower qualifies for as well as the cost and fees associated with obtaining the loan.

Lock - Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time. The lock-in may also specify the number of points to be paid at closing.

Lock Period - The number of days that the lender will guarantee the interest rate offered for a loan.  In order to hold the guaranteed interest rate for a loan, the loan closing must occur during the lock period.

Lock-in - Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time. The lock-in may also specify the number of points to be paid at closing.

London Inter-Bank Offered Rates (LIBOR) - An index used to establish the interest rate of some adjustable rate mortgages (ARM). LIBOR is the London Inter-Bank Offered Rates. This is the interest rate at which the highest rated banks offer to lend to one another in eurodollars. LIBOR offers various maturities, including 1-month, 3-month, 6-month and 1-year, however, the 6-month index is most common for mortgages. LIBOR is quoted daily in the Wall Street Journal's Money Rates.

Lot Drawing - A fee, usually associated with a survey or title policy to obtain a plat of the property to verify that there are not encroachments or easements that would affect a lender's desire to provide financing.  For our comparison purposes, the lot drawing fee is considered to be a third party fee.