L

• LIEN: The charge against a property, thus making it security for the payment of a loan, judgment, mortgage, or taxes. It is also a type of encumbrance on a property. A Personal Lien is against all the property owned by the indebted person.
• LIFE OF LOAN CAP: The limitation on the maximum interest rate that can be charged on an adjustable-rate mortgage during the term of the loan.
• LOAN APPLICATION: Documentation required by a lender before issuing a loan commitment.
• LOAN COMMITMENT: An agreement to lend a specified amount of money, at specified terms and conditions.
• LOAN-TO-VALUE RATIO (LTV): The proportion of the amount borrowed compared to the cost or value of the property purchased.

• MARGIN: The constant amount added to the value of the index (percentage of interest) for the purpose of adjusting the interest rate on an adjustable-rate mortgage.
• MATURITY: The due date of a loan.
• MORTGAGE: The written instrument that creates a lien upon property as security for the payment of a specified loan. All mortgages are valued according to the chronological order in which they are put placed onto a property. The first mortgage on a property is called a "first" in time, the next mortgage is "second" in time, and the next one after that is called "third" in time, and so on. This order is important because in the event of foreclosure, all the money from a foreclosure will go to pay off the lender of the first. Only if there is any money left over will it go to pay off the holder of the second and the third. The earlier the number, the more superior the mortgage is considered. Usually, when a first mortgage is paid off, the second takes the place of the first, and the third becomes the second, and so on.
• MORTGAGE CONSTANT: The percentage ratio between the annual debt service and the loan principal. The formula is expressed in this way: Annual Debt/Loan Principal = mortgage constant.
• MORTGAGE LIEN: The encumbrance on a property used to secure a loan. The holder of the lien has a claim to the property in case of default. The priority itself depends upon the agreements and conditions of the loan.

• NEGATIVE AMORTIZATION: The increase in the outstanding balance of a loan resulting from failure to make the monthly installments on a loan.
• NOTE: The written instrument that acknowledges a loan and states a promise to pay.

• ORIGINATION FEES: The charges to the borrower to cover the costs of issuing the loan, such as, credit checks, appraisals and title expenses.

• PERSONAL PROPERTY: Any property that does not go with the land. This includes cars, clothing, and furniture. Some items are disputable, such as, appliances and floor and wall coverings.
• PITI: Principal, Interest, Taxes and Insurance. These are the monthly payments required for most home mortgage loans.
• POINTS: A point is equal to one percentage (1%) of a mortgage amount. Lenders use the term "basis points". A basis point is one hundredth of a point. Thus, for example, ½% is 50 basis points.
• PREPAYMENT PENALTY: Fees that must be paid by the borrower for retiring (see Glossary) a loan early.
• PRINCIPAL: The owner of a property. A broker's or agent's client. The amount of money raised by a mortgage, separate from the interest paid upon it.
• PRINCIPAL AND INTEREST PAYMENT (P&I): Monthly payment that includes the interest charges for the period, plus an amount applied to amortization of the principal balance.
• PRIVATE MORTGAGE INSURANCE (PMI): Insurance on a conventional loan, provided by a private insurance company.
• PURCHASE MONEY MORTGAGE: A mortgage given by a buyer to a seller in partial payment of the purchase price of property.

• REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA): This act requires lenders to provide the buyer with specified information regarding the cost of securing financing, along with a break-down of actual costs.
• REAL PROPERTY: Another term for real estate, including the house and the adjoining land.
• REFINANCE: The substitution of a new loan for an old loan.
• RETIRING (a debt): To fully pay off the principal on a loan

• SAVINGS AND LOANS ASSOCIATIONS (S&Ls): Institutions that specialize in giving, servicing, and holding mortgage loans, primarily on owner-occupied, residential property.
• SECOND MORTGAGE: A subordinated lien, created by a mortgage loan, over the amount of a first mortgage. Second mortgages are often used to reduce the amount of a cash down payment.
• SOCIETY OF REAL ESTATE APPRAISERS (SREA): A professional association to which most qualified appraisers belong. It is best to use an SREA designated appraiser.
• SUBJECT PROPERTY: The property being appraised.
• SUBJECT-TO MORTGAGE: Condition in which the buyer takes title to a mortgaged property but is not personally liable for the payment of the amount due. The buyer does have to make payments in order to keep the property. In case of default, only the buyer's equity in the property is lost.
• SUBORDINATION CLAUSE: A clause that can be inserted into a mortgage document to keep the mortgage secondary to any other mortgages. (See Mortgage for more details).

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