Finance - Finance

Finance jargon is full of terms that seem to be utilised for extracting some form of fee from the client or punter. Solicitors are masters at this practice of term invention in order to justify or to describe a fee.

This finance jargon directory is quite extensive in its content but is by no means concise as many legal terms are omitted here but probably contained within other sections of our jargon buster.

Most people do need to get a grip of the finance jargon as it affects nearly every person able to obtain debt, loans or finance.  If you don't then it is likely that you will be charged fees for services that you did not really know about or understand.

Finance Jargon.

APR

Annual Percentage Rate of charge. The true rate of interest charged on a loan taking into account the total cost of interest and other charges e.g. brokers fees/legal fees. The calculation is set out in statutory regulations.

Arrangement Fee

This is the sum of all administration costs associated with the product.

Assets

Property, money and belongings which a person or company holds.

Assurance (Life)

A Specific type of life insurance policy often linked with a mortgage or loan. A portion of premium goes toward insuring your life, and will pay off loan in the event of death. The rest is invested and will pay a lump sum at the end of the term.

Assurance (Level Term)

Life assurance which pays out a lump sum if you die during the term. Suitable for interest only loans as the amount owed on the loan remains the same throughout the life of the loan.

Autoscore

The process of using specialised online credit search databases to identify an applicants credit status.

Available Funds (Flexible Mortgage)

The difference between the initial amount you wish to borrow (initial mortgage balance) and up to x% of the value of your home (Loan Limit). This is the amount you can take as extra borrowing throughout the term of your loan.

Bankers Draft

A withdrawal made in the form of a cheque, suitable for large purchases.

Base Rate

The Bank of England sets a base rate (officially known as a repo rate) which is used by banks and building societies, along with other factors, to set interest rates for mortgages and loans.

With a base rate tracker mortgage the interest rate on your mortgage will be a given percentage above the Bank of England base rate. The percentage difference varies for individual products within the Classic and Lifestyle ranges.

Broker (Mortgage/Finance)

An intermediary who identifies, and places, customers requiring a loan or mortgage etc. with a company (Lender) able to provide it. The broker often carries out the administration to do with processing the loan.

BSQ

BUILDING SOCIETY QUESTIONNAIRE:

A questionnaire completed by bank/building society or other lender providing details and conduct of an applicant‘s mortgage account.

Business Day

Any day which is an English bank working day (that is days of the week not including Saturdays, Sundays and English public holidays).

Capital Growth

Where the original amount you invest increases over a period of time. Generally this is achieved by interest or dividends being added back to an account for reinvestment.

Cash Advance

A withdrawal of cash made against a credit card, which is then charged to the card account.

Cashback

A type of loan where the borrower is given back a sum of money (usually a percentage of the loan). Used by lenders as an incentive to promote their products.

Cat Standards

The standards published by the Government which make it easier for people to assess the basic parts of a ISA. CAT stands for Cost, Access and Terms. You can find out more information about these standards in the ISAs section of the site.

CCJ

County Court Judgement. An order of a court against a debtor to pay money owed.

CHAPS

Clearing House Automated Payment System. An electronic way of transferring money between accounts.

Classic

All Classic Mortgages benefit from an interest rate which tracks the Bank of England base rate. You can choose from a range of special offers for the early years of the mortgage, for example fixed rate, discounted rate or a cashback.

A CAT Standard Mortgage is also available as part of the Classic range. Whichever Classic Mortgage you choose, you have attractive rates.

Commission Amount

An amount deducted to reflect the costs of providing a service.

Completion

The final step in transferring ownership of the property, when the lender will pay the rest of the buying price to the seller's legal representative, and you can collect the keys and move in.

Compulsory Excess

Where a customer is required to pay the first part of a claim.

Contribution

An amount of money paid into an account. This can be a 'one off' payment or on a regular basis.

Conveyancer

A person, used as an alternative to a solicitor, to carry out the legal work involved in buying and/or selling a property. Note: It should be checked that they are licensed to carry out this function.

Counter Cheque

A cheque withdrawal made over the counter, issued by the cashier

Dependants

Person(s) who depends on another for financial support.

Direct Debits

A payment made from your account automatically to pay bills etc, usually amounts that vary, e.g. A gas bill.

(Discounted) Rate

A discounted rate gives you a reduction of, for example, 2% off the standard variable rate (SVR) for a specific period. So, during this period should the SVR rise and fall, you will still qualify for the discount and therefore pay a lower rate.

Distribution

A cash amount paid to a holder of units in a unit trust. The amount of the distribution depends on the number of units held.

Diversified

Wide-ranging.

Dividend

A cash amount paid to a shareholder. The amount of the dividend depends on the number of shares held.

Double Insurance

Policies vary from lender to lender. Generally double insurance offers protection against sickness, accident and redundancy for the first and second wage earners. Cover is also available for self employed borrowers and under certain circumstances for non working partners. Details of the specific insurance plan will accompany the lenders offer.

Finance Tracker Ltd strongly recommend that you consider some form of insurance protection, especially in the case of secured loans, bridging loans, unsecured loans, car hire purchase, mortgages and remortgages.

Eligibility Criteria

These are criteria which you must satisfy before an account or service application can be progressed.

Emergency Home Assistance

An insurance policy that will provide a suitable tradesman to effect a repair in the event of an unforeseen home emergency e.g. a plumber for burst pipes, a roofer for lost tiles etc.

Endowment

A life assurance policy that is designed to produce a lump sum to pay off an interest only mortgage. There are a number of different kinds of endowment policies: 'with-profits', 'unit-linked' etc.

Estate Agent

A firm that works for the seller to help find buyer for their home. They earn commission from the seller of the property: as a buyer you should not incur any charges from them. Their work includes: Preparing accurate descriptions of the properties on their books; Suggesting a price that will attract buyers whilst satisfying the seller; Sending out lists of properties for prospective buyers and arranging viewings.

Exchange of Contracts

Agreement signed by house purchaser and vendor committing themselves to the transaction. Once this has occurred a legally binding contract is in existence and the purchaser must complete the purchase within a specific period of time.

Fixed Interest Stocks

Securities which carry a fixed rate of interest, also known as the coupon, normally payable for a predetermined period twice a year. Fixed income is the term usually applied in the US, while fixed interest is the European phrase.

(Fixed) Rate

The rate is fixed for a specific number of years, so you know what your payments will be over that period. Following this period, the rate will usually revert to the lender's standard variable rate.

Flexible mortgages

A more recent innovation, these give various benefits which usually include the ability to vary payments in line with your circumstances. They may also allow you to take "payment holidays" and to borrow back any overpayment you may have made. Because of their flexible nature and the variety of schemes available it is not possible to give a full description here, but your finance Representative will provide more detail if you are interested in this type of loan.

Fraudulent

Involving criminal deception or dishonesty.

Freehold

Land / Property is owned outright by the Freeholder. Whether the property is held on a lease or a freehold basis will be identified in the deeds to the property.

Gilts

Are fixed interest stock used by the UK Government.

H

No Terms Recorded

IFA

Independent Financial Advisor

IMRO

The Investment Management Regulatory Organisation.

Inflation

Sustained increase in price or earnings levels, commonly measured by changes in the Retail Prices Index (price inflation) or changes in the index of National Average Earnings (earnings inflation).

Insurance (Term)

A life insurance policy often linked with a mortgage or loan. The premium goes towards insuring your life, and will pay off loan in the event of death. No benefits are received after the policy expires.

Interest Calculation

Interest is calculated daily and charged monthly. This is officially known as 'Monthly Rest' and gives the customer immediate benefit from Overpayments or Lump Sum Payments. Please see the General Conditions section for information regarding capital repayments made during a special offer period.

Interest Only Mortgage

With this type of product, your monthly repayments will only cover the interest element of the loan. You will typically set up another repayment vehicle eg an endowment or ISA to repay the capital element of the loan

International Equities

Ordinary shares issued by companies which are quoted on the stock exchange outside the UK.

Income Replacement

An insurance policy that will provide an income in the event of job loss or illness.

Involuntary Unemployment

Where employment ends other than through the employee’s choice or because of something the employee has done. Usually means compulsory redundancy.

ISA

Individual Savings Account.

ISA Manager

A firm authorised to manage ISA's.

ISA Regulations

The Individual Savings Account Regulations 1998, including any future changes.

J

No terms Recorded

K

No terms Recorded

Leasehold

A leaseholder holds the title to land only for a finite term i.e. the length of the lease upon payment of a consideration e.g. rent.

Lender

The actual company that provides the finance to satisfy a loan or mortgage request.

Loan (Secured)

A loan to be used for any purpose. The equity in the property is put up as security against not paying the loan back.

Loan (Unsecured)

A loan to be used for any purpose. The credit rating or financial position of the applicant is such that no security for the loan is required.

LTV

Loan to value. This is the size of the loan or mortgage as a percentage of the value of the property or price being paid for the property e.g. A property valued at £50,000 with a mortgage of £45,000 would have an LTV of 90%.

MCRI

Mortgage Code Register of Intermediaries. A register maintained by the Council of Mortgage Lenders of the names of mortgage brokers subscribing to the Mortgage Code.

MGI

Mortgage Guarantee Insurance. An insurance policy designed to make good any shortfall between the amount owed on a mortgage and the value of the mortgaged property. Provides a benefit to the lender in the event of repossession resulting from non-payment.

MIG

Mortgage Indemnity Guarantee. See MGI

Mini ISA and Maxi ISA

There are three types of ISA: Mini; Maxi and TESSA only option. The ISAs section on our site explains each type of ISA. The rules amd limits are laid down by the ISA regulations. When you apply for an ISA we will confirm what type your ISA is.

MIRAS

Mortgage Interest Relief at Source. This is tax relief on mortgage interest payments. Currently 10% on the first £30,000 of the loan. However, it will be phased out in April 2000.

Monthly Fee

A fee charged once a month.

Mortgage

A loan to purchase a home where the property is used as security in the event of non-payment of the mortgage.

Mortgage certificate

Shows you how much you can borrow in principle, based on your income and outgoings. This will help when choosing your new home.

Mortgage Debt

The amount outstanding on your mortgage.

Negative Equity

The situation where the amount owed on a mortgage exceeds the value of the property.

No Insurance

Insurance is offered to provide peace of mind against life's unexpected problems which invariably occur. Selecting "No insurance" means that you are choosing not to protect your proposed loan repayment in the event of you being unable to work due to an accident, sickness or redundancy.

Offer of Advance

Sometimes informally known as a mortgage offer. This document details the terms and conditions upon which the lender is prepared to make a mortgage loan. The applicant must sign and return a copy of the offer indicating their acceptance of the proposed terms.

Office Copies

Copies of documents held at Land Registry showing ownership and mortgages outstanding on a property.

Outstanding Balance (Flexible Mortgages)

The amount to be repaid at any point in time.

Overdraft Facility

This is a facility on the Bank Account which allows customers to borrow up to a pre determined limit. This limit must be agreed in advance and is subject to status.

PIA

The Personal Investment Authority.

PIN

Personal Identification Number - a series of digits used to identify the legitimate holder of a card when used in an ATM.

POP

Point-of-Presence. A phone number through which users can access an ISP.

Portfolio

A group or range of investment products held by an individual. Can also be used to describe a range of investment vehicles in which we invest money on your behalf.

Premiums

Monetary amount paid into a policy.

Processing

The administration and paperwork related to a loan from the time a completed application form is received through to completion of the loan process.

Product Related Charge (PRC)

Also known as an Early Redemption Charge, this is a fee charged by the lender if you pay off all or part of your mortgage, or you move the loan to another lender before an agreed date. These charges usually apply to all types of mortgages.

Q

No terms Recorded

Rate (Capped)

Usually for a set number of months/years where the interest rate can go up and down but there is a maximum (capped) interest rate which it can not go above.

Rate (Variable)

A rate of interest which may vary up or down during the lifetime of a loan. The circumstances causing any change are outlined in the loan conditions.

Regulator

An organisation which regulates either us or an associate company.

Reinsure

When an insurance company itself insures with another insurance company, it is said to reinsure with the other company.

Remortgage

Loan taken out by a borrower to replace another one secured on the same property. Typically taken out by borrowers switching lenders to achieve a better rate. Finance Tracker Ltd specialise in this service.

Repo Rate

The Bank of England rate that the Flexible Mortgage tracks.

Representatives

Local representatives (Reps) who are available, if required, to pay home visits to help and advise in the completion of loan applications.

Repayment Mortgage

With a repayment mortgage you pay part interest and part capital repayments to the lender each month and in this way the capital that you borrowed is reduced until the loan is repaid.

Redemption Penalties

When a loan is redeemed (paid off) early, either in full or in part, many lenders will charge a fee. This particularly applies to Fixed, Discounted or Capped rate loans or mortgages.

Retrieval Cost

The cost incurred to recover amounts or items.

Retention

Sum of money retained from a mortgage pending completion of improvements or repairs as stipulated by the Valuer.

RTB

A term associated with legislation that gives council house tenants the Right to Buy their homes.

Return on Investment

The amount of money you receive back when an investment period has been completed.

Sealing Fee

A charge made by lenders when a mortgage is paid off.

Second Charge

Mortgage ranking behind a first mortgage ie a second loan.

Second Mortgages

Company or building society who have registered a charge or mortgage directly behind that of the first mortgages.

Second Charge

Mortgage ranking behind a first mortgage ie a second loan.

Security

When a loan is taken out it is ‘secured‘ on a property, the borrower agrees to the lender creating a charge over the property; the deed makes reference to the rights and obligations of both parties as detailed in the Legal Charge, Standard Security or Loan Agreement. Thus the property is known as the ‘security‘.

Security Address

When taking a secured loan or mortgage, the security address is the address of the property which is being offered as collateral for the loan. Where property is offered as security in this way, lenders are generally prepared to offer more flexible terms and lower interest rates.

Security Key Tags

Key rings to be placed on house keys etc., displaying an address, so if lost, the keys can be sent ,where they can be identified using a unique code and returned to their owner.

Self - Certified

Lenders that operate this type of scheme allow the applicant to confirm how much they earn by "Self-certifying" their income. Schemes are available to both employed and self employed applicants. Typically for the employed, the schemes are designed to help those applicants with incomes that incorporate a large element of bonus or where they derive income from a number of jobs. Where as for self employed there is no need for full 3 years audited accounts to be provided.

Settlement Figure

The sum quoted in order for the loan to be repaid during the contracted term.

Single insurance

Policies vary from lender to lender. Generally single insurance offers protection against sickness, accident and redundancy for the main wage earner. Cover is also available for self employed borrowers. Details of the specific insurance plan will accompany the lenders offer. Purplequote.com strongly recommend that you consider some form of insurance protection , especially in the case of secured loans and mortgages.

Solicitor/licensed conveyancer

Conveyancing is the legal term for the whole process of buying and selling a home. Firms may agree a fixed fee for the work, plus , the extra costs that your chosen firm has to pay out on your behalf. These cover: Local authority search fees - checking if there are any matters you should know about before you are committed to buying. It usually takes 1-2 weeks to be answered, depending on the local authority. Land registry this is the government department which charges for the searches and registration of your name and our mortgage on their records.Stamp duty - a government tax on properties that cost more than £60,000, which may vary. Your legal representative may have to charge you additional expenses - ask them to itemise these for you. The sellers legal representative usually prepares the contract along with other relevant documentation. The contract is a legal document that sets out many details of the property you're buying. This often refers to a map or plan that shows exactly where the boundaries are in relation to neighbouring properties which is also supplied. Other documentation will include all fixtures and fittings that are included in the sale. When everything has been agreeed, and you are happy to proceed, both parties exchange contracts - swapping the contracts that you and the seller have signed. At this point you'll also pay your deposit (typically at least 5-10% of the agreeed buying price), and sign any other relevant documentation including the mortgage deed which secures your loan over the property.

Stamp Duty

A tax (currently 1%) paid on the purchase of properties costing more than £60,000

Standard Security

The equivalent of the Legal Charge in Scotland.

Standing Order

A regular payment for a fixed amount that you can ask us to make from your account to another specified account.

Status

The credit-worthiness or otherwise of a potential borrower.

Structural Survey

A detailed survey of the structure of a building carried out by a Structural Engineer or Chartered Building Surveyor. Surveyors are liable for negligence.

Sub-prime Mortgage

Mortgage granted to a person who is unable to borrow money secured on a property from a normal lending source. The reasons the applicant may not be granted a mortgage by a high street lender, could fall into one of three categories:-

Adverse Credit information registered against them Existing arrears on current mortgage facilities An inability to satisfactorily prove the level of income required by a high street lender.

Surveyor

The qualified professional who assesses the value of a property to help the lender decide whether the property is suitable security for the mortgage. The surveyor's valuation may not be as high as the price you have agreed and you may wish to renegotiate a lower price with the sellers. The suveyor details their findings in a valuation report - the valuation for mortgage purposes - which will be sent to you with your mortgage offer, usually within 2-3 weeks. If you require more information about the property, there are other surveys which can be conducted. We can arrange a surveyor to provide a Home View giving general information on the state of repair and condition of the property as well as information relating to its security and energy efficiency. Home View also provides 12 months' insurance cover for hidden defects and a home emergency repair service. Surveyors have to belong to a professional organisation - Royal Institute of Chartered Surveyors (RICS) or the Incorporated Society of Valuers and Auctioneers (ISVA).

Target Retirement Income

The amount of annual income which the customer wants from his pension.

Tax Credit

When a distribution or dividend is received , a tax credit normally attaches to it and we will normally reclaim this from the Inland Revenue.

Tax Efficiency

Where certain investment accounts are used to maximise tax free opportunities.

Tax Relief

An allowance given to an individual based on their personal tax status.

Tax Status

An individuals position in respect of Inland Revenue rules which lay down who does and does not pay tax, how much should be paid.

Tax Year

The period from 6 April in a year to 5 April of the following year.

Term

Period of a loan expressed in months or years.

TESSA

Tax Exempt Special Savings Account.

TESSA Maturity

At the end of a Tessa’s 5-year term, the account is closed and the capital and tax free interest are returned or reinvested according to the customers wishes.

Tiered in Credit Interest

The rate of interest is structured to rise for larger balances.

Title Deeds

Set of documents relevant to present and past ownership of a property. Details names of owners and details of institutions that have registered a charge against the property. Held by the first mortgagee lender whilst their charge remains in existence.

TOISA

A TOISA (TESSA only-ISA) is a special tax-free account designed by the Government as a home for the capital you have invested in your TESSA, once your TESSA comes to an end. A TOISA can be held in addition to the annual ISA limits, but can only be opened within six months of a TESSA maturing.

UK Equities

Are the ordinary shares in issue by each company quoted on the UK stock exchange.

UK Quoted Securities

Are those formally quoted and listed on the London stock exchange.

Underwriting

The process by which the ability of a prospective borrower to repay a loan is assessed (also the name of the department that undertakes this work). The process takes into account various factors including employment history, financial status, previous credit history and current earnings.

Unsecured Loan

A loan to be used for any purpose. The credit rating or financial position of the applicant is such that no security for the loan is required.

Valuation

A brief inspection of a property for mortgage purposes. Whilst it is for the lenders use it is often paid for by the loan applicant.

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