Mortgage Glossary
There are a lot of unfamiliar terms that get tossed around during the mortgage process. But don't worry, we've put together this glossary to help you get a better grasp of any terms that may be less than clear.
L
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 involuntary 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.
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 Estimate
A universal form, created by the Consumer Financial Protection Bureau (CFPB), that is provided to the borrower within three business days after receipt of the loan application. The form contains important details about the loan, including the estimated interest rate, monthly payment and total closing costs. It will also detail any special loan features such as increases in the interest rate, the mortgage loan balance or prepayment penalties.
Loan Origination
The process by which a mortgage lender creates a mortgage secured by real property.
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.