Glossary - L

lay-by

When goods are paid for over time by payment of a deposit and then regular amounts over a certain period. You cannot take home the goods until you have paid the full price.

lease

A document that grants someone the use of a property for a given period in return for rental payments. The document will specify the terms and conditions of the agreement.

lender's mortgage insurance (LMI)

Lender's mortgage insurance (LMI) is a type of insurance that protects a credit provider from borrowers not being able to repay their loan. LMI is usually a one-off cost to a home loan borrower, payable when the amount borrowed exceeds 80% of the value of the property. LMI does not benefit the borrower, it only protects the lender.

leverage

The use of financial instruments or borrowed capital to increase potential gains or losses. For example, borrowing money to invest in property or other assets, buying a share in a 'geared' managed fund or investing in derivatives.

liability

A debt or money owed, for example, a bank loan or credit card debt.

life cover

An insurance policy that pays a set amount of money to an insured person’s beneficiaries when the insured person dies. Also known as term life insurance or death cover.

limit

The amount of calls, texts and data you can use in your plan each month. If you go over your limit, there is usually an extra charge.

limited partnership

An agreement between two or more people, who carry on a business with the intention of making a profit. At least one partner must be a general partner, responsible for managing the business and entering into agreements on behalf of the partnership. General partners have unlimited liability. At least one partner must be a limited partner. Limited partners are passive investors whose liability is limited to the amount of money they have invested.

limited recourse loan

A loan used to purchase a single asset or group of assets where the lender's claim on assets is limited to the asset(s) purchased with the loan, if the borrower defaults on the loan.

line of credit loan

Allows you to use a single account for your home loan and everyday spending. Interest is added to the loan each month and repayments are not necessary while the loan is within its credit limit. It allows you access to the equity in your home without having to apply for a new loan.

liquidity

How easily an investment or financial product can be converted to cash. Shares in large publicly listed companies that are regularly traded on the ASX (Australian Securities Exchange) are considered liquid assets, while direct property investments are less liquid, due to difficulties and time delays that may be experienced when buying and selling. Liquid markets have enough trading activity to allow both buyers and sellers to easily transact as they wish.

listed property trust

Trust funds listed on a securities exchange and managed by an investment manager (also known as real estate investment trusts (REITs). May invest in a specific type of property such as residential, industrial, office buildings, shopping centres or hotels, or in a diversified portfolio of real estate assets either in Australia or overseas.

loan consolidation

When several loans are combined into one, with the aim of reducing repayments. Also known as debt consolidation.

loan to value ratio (LVR)

The amount of a loan as a percentage of the value of the asset it was used to buy. It is calculated by dividing the loan amount by the value of the asset.

locked phone

A phone that is locked to one service provider that will not work if you leave that provider.

low-doc loan

A loan that requires less financial documentation to prove income, assets and liabilities than a standard loan. Typically used by self-employed people and small business owners, they are usually offered at higher interest rates and may include terms that restrict borrowers.

LVR

Loan to valuation ratio. The amount of a loan as a percentage of the value of the asset it was used to buy. It is calculated by dividing the loan amount by the value of the asset.

 


Last updated: 18 Nov 2015