A lien is a legal claim held by a creditor against an asset to guarantee repayment of the debt. Mortgage liens are regularly used in real estate lending as collateral for a loan.
A lifetime cap is the limit to how much the interest rate on an adjustable mortgage rate (ARM) can be increased over the term of the loan.
Line of credit
A line of credit is a form of borrowing money called a revolving credit instrument. With a line of credit, the borrower can draw down only the amount needed, up to the amount of the credit limit. The borrower only pays interest on the amount drawn, or disbursed. Like a credit card (another form of revolving credit), you can continuously draw funds from the credit line up to its limit. Some HECMs offer a line of credit as a payment option.
Payments made to a borrower from the established line of credit. Guidelines and limits may vary.
Loan balance/principal balance
This term describes a loan's outstanding balance, not including interest owed.
The final stage of the loan process that requires an exchange of any monies due and any signatures required to finalize a transaction. Closing costs are paid at the closing.
A loan payoff is a payment that you make on a loan or other debt to remove the entire amount owed. A loan pay-down, in comparison, is a payment that you make on a loan or other debt to settle the amount owed.
See discount points.
Loan-to-value ratio (LTV)
Your loan-to-value ratio is a key factor in determining how much of a home you can qualify for. To calculate, divide the mortgage loan amount by the fair market of the home value. A recent appraisal is generally required to determine fair market value. If you have existing mortgage debt or are adding debt, divide the combined mortgage balance by the home value. For example, a mortgage loan of $150,000 on a home that is appraised at $200,000 has an LTV of 75%. As a general rule, mortgage loans that exceed an LTV of 80% require private mortgage insurance (PMI).
A single loan advance at closing. Home equity loans are usually made to borrowers as a single lump sum payment.