Legal Description


A written description of a parcel of real estate. Some legally recognized examples include:
  • Metes and Bounds (defines boundary lines)
  • Lot and Block (Recorded Plat Survey System)
  • Public Land Survey System (a grid system based on township, range and section numbers)
When transferring real estate, it is required to include a legal description in the Deed.

Legal Title


Legally enforceable evidence of ownership of a property.

Lender


A private or public entity or individual that originates or holds loans.

Lessee


A public or private entity or person to whom property is rented pursuant to a Lease Agreement. Also called Tenant.

Lessor


A public or private entity that owns an interest in real property and has leased such interest, or a portion thereof, to another party (the Tenant). Also called Landlord.

Letter of Intent


A preliminary Agreement between two or more parties defining the proposed terms of a final Contract.

Leverage


1. The use of borrowed money to increase the potential return of an investment.
Example: ABC Company has $100,000 to invest. If it borrows an additional $75,000, its investment is bigger, which therefore raises the potential return.

2. Borrowed money used to finance an investment.
Example: ABC Company was formed with $2 Million from different investors. The equity in the company is $2 Million, which is what the company uses to operate. If ABC borrows $10 Million, it now has $12 Million to invest in business operations and more opportunities to increase value for shareholders. Leverage can be a gain or loss as an investment may be positive or negative.

Loan Commitment


An Agreement by the lender to lend money that lists the specific terms of a loan, such as the amount being borrowed and its maturity date.

Loan Origination


The process of structuring a new loan from the application to the disbursement of funds.

Loan Servicing


The ongoing administration of a loan beginning from the disbursement of funds and ending with the final payment and Release of Mortgage. The services vary depending on the terms agreed to by the borrower and investor on the loan. The mortgage bank is compensated with a small fee, typically 0.25% to 0.5%, of the loan balance. Services include invoicing, collection of payments, collecting and paying taxes and insurance and managing Escrow Accounts.

Loan to Value Ratio (LTV)


A risk assessment ratio calculated as mortgage debt divided by the value of the property. If the LTV ratio is a high number, the lender usually requires the borrower to purchase mortgage insurance to protect the lender from default. As with other lending risk assessment ratios, criteria other than the LTV ratio are required to assess a mortgage.
Example: ABC Company needs to borrow $90,000 to purchase a property for $100,000. The LTV is a high 90% which means ABC might need to buy mortgage insurance in order to receive the loan.