Financial Terms Glossary: L M N O

Late Fee | The fee charged customers for paying late or less than the required minimum payment due by the due date. Late Payment | A delinquent payment or failure to deliver a loan or debt payment on or before the time agreed. Late payments harm your credit score for up to 7 years and are usually penalized with late payment charges. Late Payment Charge | A fee charged by your creditor or lender when your payment is made after the date due. Late payment charges usually range from $10-50. Lender The individual or financial institution who will be providing the loan. Lien A legal claim against a person’s property, such as a car or a house, as security for a debt. A lien (pronounced “lean”) may be placed by a contractor who did work on your house or a mechanic who repaired your car and didn’t get paid. The property cannot be sold without paying the lien. Tax liens can remain on your credit report indefinitely if left unpaid or for 15 years from the date paid. Loan Origination Fee | A fee charged by a lender for underwriting a loan. The fee often is expressed in “points;” a point is 1% of the loan amount. Loan Processing Fee | A fee charged by a lender for accepting a loan application and gathering the supporting paperwork. Loan-to-Value Ratio (LTV) | The percentage of a home’s price that is financed with a loan. On a $100,000 house, if the buyer makes a $20,000 down payment and borrows $80,000, the loan-to-value ratio is 80%. When refinancing a mortgage, the LTV ratio is calculated using the appraised value of the home, not the sale price. You will usually get the best deal if your LTV ratio is below 80%. Low-Documentation Loan | A mortgage that requires less income and/or assets verification than a conventional loan. Low-documentation loans are designed for entrepreneurs or self-employed borrowers – or for borrowers who cannot or choose not to reveal information about their incomes. Low-Down Mortgages | Secured loans that require a small down payment, usually less than 10%. Often, low-down mortgages are offered to special kinds of borrowers such as first-time buyers, police officers, veterans, etc. These kinds of loans sometimes require that private mortgage insurance (PMI) is purchased by the borrower. Maxed Out | A slang term for using up the entire credit limit on a credit card or a line of credit. Borrowing the maximum limit on credit cards hurts your credit score. Merged Credit Report | Also called a 3-in-1 Credit Report, this type of report shows your credit data from TransUnion, Equifax and Experian in a side-by-side format for easy comparison. Order a merged credit report. Minimum Payment | The minimum amount that a credit card company requires you to pay toward your debt each month. Mortgage Banker | A person or company that originates home loans, sells them to investors (such as Fannie Mae) and processes monthly payments. Mortgage Broker | A person or company that matches lenders with borrowers who meet their criteria. A mortgage broker does not make the loan directly like a mortgage banker, but receives payment for their services. (See Broker Premium) Mortgage Interest Expense | A tax term for the interest paid on a loan that is fully deductible, up to certain limits, when you itemize income taxes. Mortgage Refinance | The process of paying off and replacing an old loan with a new mortgage. Borrowers usually choose to refinance a mortgage to get a lower interest rate, lower their monthly payments, avoid a balloon payment or to take cash out of their equity. Negative Amortization | When your minimum payment toward a debt is not enough to cover the interest charges. When this occurs, your debt balance continues to increase despite your payments. Net Income | Your income after taxes and other withholdings have been deducted, or your take-home pay. Notice of Reaffirmed Debts | If you have ever defaulted on a debt, be careful that your solicitations for “new” cards don’t mention your old debts. Some credit card issuers buy old debts from other companies and then offer “new” cards to people in debt, only to shock the cardholder on their first statement with the old debt. Opt-Out You can opt-out from pre-approved credit card offers, insurance offers and other third party marketing offers or solicitations by calling 1-888-5-OPT-OUT. Calling this number will stop mail offers that use your credit data from all three credit bureaus. You can also call this number to ask to opt-in again. Open Debts | Also known as open lines of credit, or “charge cards”, these debts are due in full at the end of each month; the most common open credit line is the traditional American Express card. Over-Limit Fee | A fee charged by a creditor when your spending exceeds the credit limit set on your card, usually $10-50. Under the CARD Act, credit card issuers must first get your consent before charging over-limit fees and they are only allowed to charge one over-limit fee per billing cycle.