Mortgage Terms L

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Late Charge

A penalty imposed by the lender when a borrower fails to make a scheduled payment on time.

Lease-Purchase Option

An option sometimes used by sellers to rent a property to a consumer, who has the option to buy the home within a specified period of time. Typically, part of each rental payment is put aside for the purpose of accumulating funds to pay the down payment and closing costs.

Liabilities

A person's debts and other financial obligations.

Liability Insurance

Insurance coverage that protects property owners against claims of negligence, personal injury or property damage to another party.

LIBOR-Index

An index used to determine interest rate changes for certain ARM plans, based on the average interest rate at which international banks lend to or borrow funds from the London Interbank Market.

Lien

A legal encumbrance or claim on property as security for a debt.

Lifetime Cap

For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate or monthly payment can increase or decrease over the life of the loan.

Liquid Asset

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

Loan Origination

The process by which a lender makes a loan which may include taking a loan application, processing and underwriting the application, and closing the loan.

Loan Origination Fee

A fee to cover some of the administrative costs of processing a loan. It is often expressed in points. One point is equal to 1 percent of the loan amount.

Loan-To-Value (LTV) Ratio

The relationship between the loan amount and the value of the property (the lower of appraised value or sales price), expressed as a percentage of the property's value. For example, a $100,000 home with an $80,000 mortgage has an LTV of 80 percent.

Lock-in

An agreement in which the lender agrees to "lock-in" the borrower's interest rate for a set period of time before closing.

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