K-O

Lenders mortgage insurance (LMI)

Insurance taken out by a bank (at an additional cost to the borrower) to protect themselves in the event the borrower becomes unable to pay what they owe on a loan. This type of insurance generally comes into play when a person borrows greater than or equal to 80% a property’s value.

Liability

A debt or money owed, such as a loan. In contrast to an asset, a liability detracts from revenue.

Limited Recourse Borrowing Agreement (LRBA)

A type of loan from a third party lender, used primarily within SMSFs, designed such that a trustee can use the funds to purchase a single asset (or group of identical assets with equal market value). In the event of a loan default, the lender’s claim is limited to the asset(s) purchased with the loan.

Managed fund

An investment type supported by the security or collateral from multiple different investors.

Negative gearing

Where the income is less than the costs of owning and running that investment. In other words, there is a financial loss created by owning that investment (before capital growth or other benefits are considered).

Neutral gearing

Where the income of the asset is equal to the costs of owning and running that investment.

Off-the-plan property

Property which is available for purchase in development stages, prior to completion.