K - O

key lot

Real estate deemed highly valuable because of its location.

lien

A claim against a property for the payment of a debt. A mortgage is a lien; other types of liens a property might have include a tax lien for overdue taxes or a mechanics lien for unpaid debt to a subcontractor.

liquidity

The capability of an asset to be readily converted into cash.

loan-to-value ratio (LTV)
The relationship, expressed as a percentage, between the amount of the proposed loan and a property's appraised value. For example, a $75,000 loan on a property appraised at $100,000 is a 75% loan-to-value.

lock-in:
The guarantee of a specific interest rate and/or points for a specific period of time. Some lenders will charge a fee for locking in an interest rate.

maintenance costs

The cost of the upkeep of the house. These costs may be minor in cost and nature (replacing washers in the faucets) or major in cost and nature (new heating system or a new roof) and can apply to either the interior or exterior of the house.

margin

The amount a lender adds to the index of an adjustable rate mortgage to establish an adjusted interest rate. For example, a margin of 1.50 added to a 7 percent index establishes an adjusted interest rate of 8.50 percent.

market value

The price a property can realistically sell for, based upon comparable selling prices of other properties in the same area.

modification

A change in the terms of the mortgage note, such as a reduction in the interest rate or change in maturity date.

mortgage

A legal instrument in which property serves as security for the repayment of a loan. In some states, a deed of trust is used rather than a mortgage.

mortgage banker

A lender that originates, closes, services and sells mortgage loans to the secondary market.

mortgage broker

An intermediary between a borrower and a lender. A broker's expertise is to help borrowers find financing that they might not otherwise find themselves.

mortgage insurance

Money paid to insure the lender against loss due to foreclosure or loan default. Mortgage insurance is required on conventional loans with less than a 20 percent down payment. FHA mortgage insurance requires a payment of 1.5 percent of the loan amount to be paid at closing, as well as an annual fee of 0.5 percent of the loan amount added to each monthly payment.

mortgage interest

Interest rate charge for borrowing the money for the mortgage. It is a used to calculate the interest payment on the mortgage each month.

mortgage term

The length of time that a mortgage is scheduled to exist. Example: a 30-year mortgage term is for 30 years.

mortgagee

The lender.

mortgagor

The borrower.

negative amortization

A situation in which a borrower is paying less interest than what is actually being charged for a mortgage loan. The unpaid interest is added to the loan's principal. The borrower may end up owing more than the original amount of the mortgage.

non-assumption clause

In a mortgage contract, a statement that prohibits a new buyer from assuming a mortgage loan without the approval of the lender.

non-conforming loan

A loan that does not conform to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines. Jumbo loans are nonconforming. See also: conforming loan.

note

A signed document that acknowledges a debt and shows the borrower is obligated to pay it.

open-end mortgage

A mortgage allowing the borrower to receive advances of principal from the lender during the life of the loan. See also: closed-end mortgage.

origination fee

The amount charged by a lender to originate and close a mortgage loan. Origination fees are usually expressed in points.