Dictionary

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The amount added to the cost of mortality (death) to cover the operating expenses of the insurer, such as commissions and the cost of underwriting.

Loan

A sum of borrowed money (principal) that is generally repaid with interest.

Loan Commitment

See Commitment Letter.

Loan Discount

See Discount Points.

Loan Origination

The process by which a mortgage lender brings into existence a mortgage secured by real property.

Loan Origination Fee

The amount a lender charges for processing a loan, usually a percentage of the face amount of the loan.

Loan-to-value (LTV) Percentage

The relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with an $90,000 mortgage has a LTV percentage of 90 percent.

Loan Value

That amount of Cash Value in a Whole Life or Endowment policy that may be borrowed by the insured. When you borrow from your policy, the insurer is loaning you their money and keeping your money as collateral. Since they usually have their funds invested, they will charge you annual interest on the loan (maximum 8% in most states). Loans don’t have to be paid back while you are alive, but will continue to accrue interest. Upon death, the amount of the unpaid loan plus accrued interest will be subtracted from proceeds.

Locational Obsolescence

See External Obsolescence.

Lock-in

A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.