Investment Glossary:

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L

Land Contract:  See Contract for Deed.

Land Lease:  See Ground Lease.

Land Trust:  A revocable, living trust primarily used to hold title to real estate for privacy and anonymity.  Also known as an Illinois Land Trust or Nominee Trust. The land trustee is a nominal title holder, with the beneficiaries having the exclusive right to direct and control the actions of the trustee.

Landlocked:  Condition of a lot that has no access to public thoroughfare except through an adjacent lot.

Lease:  A contract in which, for a rent payment, the one entitled to the possession of the real property (Lessor) transfers those rights to another (lessee) for a specified period of time.

Lease Option:  A lease combined with an option agreement that gives the lessee (tenant) the right to purchase the property under specified conditions.

Lease Purchase:  A lease combined with a purchase agreement that obligates the lessee (tenant) to purchase the property under specified conditions.

Leasehold:  The interest or estate on which a lessee (tenant) of real estate has a lease.

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 Blemish:  Blemishes on a piece of property, such as a zoning violation or fraudulent title claim.

Legal Description:  Legally acceptable identification of real estate by government survey, metes and bounds, or recorded plat.

Lessee:  A person to whom property is rented under a lease.

Lessor:  One who rents property to another under a lease.

Let:  To rent a property to a tenant.

Letter of Intent:  Written expression of desire to enter into a contract without actually doing so.

Liabilities:  A person's debts or financial obligations.  Liabilities include long-term and short-term debt, as well as potential losses from legal claims.

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.  See also homeowners insurance.

Lien:  A legal hold or claim on a property of another as security for money owed. The right given by law to satisfy debt.  Examples of types of liens would include judgments, mechanic's liens, mortgages and unpaid taxes

Lien Theory State:  Texas is a Lien Theory State, where legal title of mortgaged property resides with the mortgagor (borrower), with the mortgage as a lien against the property. Contrast with title theory state.

Life Estate:  An estate whose life is limited to the life of an individual.  Upon that person's death, the property passes to a beneficiary, who retains the use and possession of the property, but may not sell it.  The estate is terminated upon death of the beneficiary. 

Life Tenant:  One who is allowed to use property for life or the lifetime of another designated person.

Lifetime Cap:  The highest amount over the initial interest rate that an adjustable mortgage can be raised. Lifetime caps are typically in the range of 5.0%:  7.0%. If the initial interest rate is 5.25% and the lifetime cap is 6.0%, the highest interest rate a borrower could pay during the course of the loan would be 11.25% (5.25% + 6.0%).

Like-Kind Property:  Property having the same nature.

Limited Partnership:  One in which there is at least one partner who is passive and limits liability to the amount invested and at least one partner whose liability extends beyond monetary investment.

Line Of Credit:  An agreement by a lender to extend credit up to a certain amount for a certain time without the need for the borrower to file another application.

Liquidated Damages:  An amount agreed upon in a contract that one party will pay the other in the event of a breach of contract.

Liquidity:  Ease of converting assets to cash.

Lis Pendens:  Latin for "suit pending", recorded notice of the filing of a lawsuit, the outcome of which may affect title to real property.

Lis Pendens Notice:  Announcement that a lawsuit is pending which has the purpose of affecting the title to particular property described therein.  This Notice is filed in the public records for the purpose of preventing any transactions which would thwart the purpose of the pending lawsuit.

Listing:  Written agreement between a principal and an agent authorizing the agent to perform services for the principal involving the principal's property.

Loan Application (1003):  A loan application that is required for conforming loans. It has become the standard application for most residential loans, even non-conforming loans.

Loan Coverage:  The ratio of net income before depreciation divided by debt service.

Loan Origination Fee:  Most lenders charge borrowers an origination fee--or points--for processing a loan. A point is 1 percent of the total loan amount.

Loan Package:  The organized group of documents that contains all of the information required to obtain an underwriting decision of loan approval or loan denial. Depending on the type of loan and the particular lender, a package may contain some or all of the following as well as other documents: loan application, statement of use of funds, statement of net worth, P & L statements, tax returns, pay stubs, statements from various types of banking and investment accounts, property appraisal, letters of explanation, credit report, verification of employment, verification of housing payments, purchase agreement, etc. (See definition of "underwriting" below.)

Loan to Value Ratio (LTV):  The relationship of a mortgage to the appraised value of a security as calculated by dividing the loan balance of a property by its market value.  This ratio is expressed to a potential purchaser of property in terms of the percentage a lending institution is willing to finance.  If the loan is $80,000 and the value of the property is $100,000 the LTV is 80% ($80,000/$100,000).

Lock-in Period:  There are two common definitions for this term:

• That portion of the term of a mortgage load during which the loan cannot be prepaid.
• A set period of time, generally 60-90 days, during which a mortgagor agrees to hold the mortgage rate and points payable by the borrower to the rate quoted when the application was taken.

Lot and Block:  Method of identifying legal description of property, see Legal Description.

Lot Line:  A line bounding a lot as described in a property survey.

Low-Documentation Loan:  A mortgage that requires only minimal verification of income and assets

Low-Down-Payment loan:  A home loan that requires the borrower to make only a small down payment before obtaining the financing needed to purchase a house.