Financial Services Glossary
Confused by some of the terminology used in relation to Financial Services? Want to know the difference between your ISA and your AER? Then you’ve come to the right place. Our jargon busting A-Z financial glossary should help you find the meaning of some of the terms you are likely to come across on our website, in our literature, or elsewhere.
To navigate through the A-Z please use the quick links below:
A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, P, Q, R, S, T, U, V, W, X, Y, Z.
A
Administration fee:
A fee, which is usually non-refundable, that may be charged when processing an application for a product or when setting up an account.
Advance:
The amount of money provided to you by a financial institution by way of a mortgage or a loan.
Adverse Credit:
A term used when referring to consumers with a poor credit rating or history. People classified as having an Adverse Credit background can sometimes struggle to qualify for a mortgage or other financial products.
AER - Annual Equivalent Rate:
The AER shows what the interest rate would be if interest was paid and added to the account once each year. As every advertisement for a savings product which quotes an interest rate will contain an AER, the AER will enable you to compare more easily the interest rates offered.
AGM - Annual General Meeting:
A yearly meeting where shareholders of a company, or in the Cheshire’s case, members, can vote and be updated on some decisions and workings of the organisation. AGM's also deal with the election and/or re-election of company directors.
APR - Annual Percentage Rate:
The industry standard calculation used to show the total cost of a mortgage or loan. The figure includes costs which are not included in the basic interest rate such as interest payments, valuation fees, legal fees and administration fees.
Arrangement fee:
A fee sometimes charged to reserve a mortgage product. This fee is usually non-refundable.
ASU:
Accident, Sickness & Unemployment cover (ASU) is a type of insurance policy designed to provide a regular income to pay your mortgage or loan repayments should you become unemployed or be unable to work due to accident or sickness.
The Cheshire offers Mortgage Payment Protection provided by Cardif Pinnacle and Payment Protection (for Cheshire Personal loans arranged through the Co-Operative Bank), which is provided by Norwich Union.
B
Balance Transfer:
In relation to credit cards, a balance transfer refers to the process of transferring the outstanding balance on one credit card across to another, usually to obtain a preferential rate of interest or an interest free period.
The Cheshire's credit card (provided by MBNA)
currently allows customers an interest free balance transfer option for 12 months after the account is opened.
BBR - Bank of England Base Rate:
Bank of England Base Rate is the interest rate at which the Bank of England lends money to other banks and financial institutions.
Bonds:
See Fixed Rate Bonds below.
Building Society:
A building society is a mutual financial institution, owned by its members, that offers banking and other financial services, especially mortgage lending. Customers who have a savings account, or mortgage, are members and have certain rights to vote and receive information, as well as to attend and speak at meetings. Each member has one vote, regardless of how much money they have invested or borrowed or how many accounts they may have. Each building society has a board of directors who run the society and who are responsible for setting its strategy.
Buildings Insurance:
Insurance that provides compensation if your house is damaged or destroyed by any of the hazards (or ‘risks’) set out in the policy such as fire, flood and subsidence and, in some cases, damage caused by third parties.
This type of insurance does not normally cover the contents of your home, although combined buildings and contents insurance policies can be obtained.
Buy to Let Mortgage:
A mortgage used to purchase a property that will be rented out following the acquisition.
Buy to Let Home Insurance:
A Buy to Let Home Insurance policy is a policy designed to provide cover for Buy to Let properties and can include cover for theft and malicious damage caused by the tenant.
C
Capital:
Capital refers to financial or physical assets which are capable of generating income. In relation to a mortgage, capital is the amount of money you borrow.
Capital Repayment:
A lump sum repayment of part of the capital that you have borrowed, which is made in addition to your regular repayments.
Cashback:
An offer that provides a cash lump sum when you complete the purchase of a qualifying financial services product.
CAT (Charges, Access & Terms):
CAT standard mortgages and ISAs comply with the Government's recommended best-practice guidelines.
Child Trust Fund:
A long term savings account set up for newborn children in the UK. Parents who register for Child Benefit automatically receive a voucher from the Government worth £250, which must be used to open a Child Trust Fund Account, for the benefit of the child when he or she reaches the age of 18. Check out the Cheshire's Child Trust Fund area for more information.
Commonhold:
Your home may be freehold, leasehold or commonhold.
Commonhold is a new type of ownership, created in 2002, which is, in practice, rarely encountered.
Completion date:
As part of the house purchase process, a completion date will be agreed between buyer and seller before exchanging contracts. The completion date is the date when the property ownership is legally passed from the seller to the buyer and when the seller must move out and the buyer can move in.
Conclusion of Missives:
The Scottish equivalent of 'Exchange of Contracts.'
Contents Insurance:
Insurance to cover the possessions in your property in the event of fire, theft or damage.
Contracts:
A contract is a legally binding exchange of promises or agreement between parties that the law will enforce.
A contract can deal with many things, but in relation to the purchase of land and buildings, it means the legal document containing the terms agreed by the buyer and seller. There are usually two copies of the document, one being signed by the seller and the other by the buyer.
Conveyancer:
A legal practitioner hired by the buyer or seller to represent him or her in the conveyancing process. The Cheshire currently offers a conveyancing service through our trusted partners LMS. Please see our Conveyancing area for more details.
Conveyancing:
The process of legally transferring property ownership from the seller’s name to the buyer’s name. The Cheshire currently offers a conveyancing service through our trusted partners LMS. Please see our Conveyancing area for more details.
Council of Mortgage Lenders:
The Council of Mortgage Lenders (CML) is the trade association for the mortgage lending industry and its stated aim is to help to foster a favourable operating environment in the UK housing and mortgage markets.
The CML produces useful consumer guides to help with the home-buying process.. For more information visit: http://www.cml.org.uk/cml/consumers (link opens in a new window)
Credit Card:
A credit card allows customers to make purchases or pay for services up to a pre-agreed limit, and then pay off the balance at a later date, either in a lump sum or by monthly payments. Interest is calculated and charged on the balance outstanding.
The Cheshire offers a credit card (provided by MBNA), please see our Credit Card for more details.
Credit History:
This is the borrowing history of an individual consumer and will often be checked by lenders before they sanction a loan, mortgage or credit card.
Credit Report:
A report that can be purchased by consumers to check their own credit history. Consumers interested in obtaining their credit score can purchase their own credit report from an established credit scoring website such as Experian (opens in new window) or Credit Expert (opens in new window).
Credit Scoring:
A score that individual consumers are given by credit lenders in order to assess their suitability to repay loans and mortgages.
D
Deposit:
In the house buying process, a deposit is the amount of money (traditionally 10% of the purchase price, although this can vary) that you pay on exchange of contracts as part the purchase price of the property.
Disbursements:
These are fees that a solicitor or conveyancer will incur during the conveyancing process. The fees will form part of your overall legal costs. Typical examples include various search fees & Land Registry fees.
Discount Mortgages:
A Discount Rate Mortgage is a mortgage, which has an agreed discount to the standard variable rate (SVR) for a fixed period of time. Although the interest rate could go up or down, the discount will ensure that the interest rate will always be below SVR for the duration of the discount period.
E
Early Repayment Charge:
In relation to mortgages, an Early Repayment Charge can sometimes be incurred if part or all of your mortgage is paid off before a pre-agreed date, or moved to another product or lender.
Endowment Policy:
This is a type of savings plan that aims to pay off your mortgage at the end of the term (although this may not be guaranteed), or pay off an outstanding mortgage balance in the event of death. An Endowment Policy could be used as a repayment vehicle for an interest only mortgage.
Equity:
The difference at any time between the value of a property and the total amount of borrowings secured against that property.
Excess:
This is a fixed sum of money which a policy holder agrees to pay from his own funds towards the cost of a claim under an insurance policy.
Exchange of Contracts:
This refers to the physical exchanging of contracts when a property is sold. Once contracts have been exchanged the seller is legally obliged to sell the property and the buyer is legally obliged to buy the property.
F
FSA - Financial Services Authority:
The independent government watchdog that regulates and governs the financial services industry. You can visit the FSA website (opens in new window) for more details.
First Legal Charge:
A First Legal Charge is usually required by mortgage lenders when arranging a mortgage. This legal document charges a property to the lender as security for repayment of the money borrowed. It gives the lender power to repossess the property and sell it if repayments are not satisfactorily maintained.
First Time Buyer:
The Cheshire defines a First Time Buyer as somebody whose name has never appeared on the title deeds to a property, regardless of whether the property was mortgaged or not. To be eligible for a joint first time buyer mortgage product only the first applicant must be a first time buyer. Please note that other financial institutions will have a different definition for the status of a First Time Buyer.
Fixed Rate Bond:
A Fixed Rate Bond is a form of lump sum investment that offers a guaranteed rate of interest over a fixed term, usually between one to five years. Interest can often be paid monthly, annually or at maturity depending on the bond you choose. Fixed Rate Bonds are suitable for people who do not need access to their money during the agreed term. Don't forget to check out the Cheshire's Fixed Rate Bonds if you are considering investing a lump sum.
Fixed Rate Mortgage:
A mortgage where the interest rate is fixed for a set amount of time, offering stable repayments during the fixed rate period. Please refer to Cheshire's Fixed Rate Mortgages if you are interested in this type of mortgage.
Flexible Mortgage:
This is a mortgage that offers some flexibility regarding repayment. A flexible mortgage will often allow borrowers to make underpayments, overpayments and take payment holidays.
FOS - Financial Ombudsman Service
The Financial Ombudsman Service (FOS) was set up by law as an independent public body. Its role is to help settle individual disputes between consumers and businesses providing financial services fairly, reasonably, quickly and informally and its service is free to consumers.
FOS can help with complaints about most financial matters involving products and services provided in (or from) the UK. The areas it covers include:
- banking
- insurance
- pensions
- savings and investments
- credit cards and store cards
- loans and credit
- hire purchase and pawn broking
- financial advice
- stocks, shares, unit trusts and bonds
For further details of the Financial Ombudsman Service, see the Financial Ombudsman Service website (link opens in a new window).
Freehold:
Your home may be freehold, leasehold or commonhold.
Freehold means that the property is owned without any time limit on that ownership.
Free Market Valuation:
This refers to a free basic valuation of your property to determine its likely market value. If you live in the Cheshire, Buxton or Deeside regions and would like a free market valuation of your home or property, without obligation, please visit our Cheshire Estate Agency pages of the website.
Full Structural Survey:
A Full Structural Survey provides a more detailed survey of property than a Homebuyers Report. However, even a Full Structural Survey will be subject to exclusions. eg. For areas that the surveyor could not get to or which were covered by floor coverings.
Further Advance:
Extra borrowing secured against a property in addition to any initial mortgage advance.
G
Gazumping:
A commonly used term in property sales, where a seller agrees terms with a buyer for the sale of a property, but then accepts a higher offer from a subsequent bidder. “Gazumping” can only occur before the exchange of contracts, as the seller has a legal obligation to conclude the deal with the buyer, once contracts have been exchanged.
Gazundering:
A term used to describe the situation where a buyer agrees a price and then lowers his offer on the property, usually at a late stage in the negotiations. ‘Gazundering’ can only occur before exchange of contracts as the exchange of contracts fixes the price.
Gross Interest:
Gross interest rate is the interest rate before any UK income tax is deducted.
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Guarantor:
A third party who guarantees repayment of a loan or mortgage, using his/her own assets if necessary. Parents will often act as guarantors to help their children obtain a mortgage.
H
HIPS - Home Information Packs:
Since 14 December 2007 every home placed on the market, no matter what size, must have a Home Information Pack. The pack brings together valuable information at the start of the house buying process - such as a sale statement, local searches and evidence of title - which could save you money, time and stress. The Pack also includes an Energy Performance Certificate that contains advice on how to cut CO2 emissions and fuel bills.
Further further information see http://www.homeinformationpacks.gov.uk/consumer/43_For_buyers.html (link opens in a new window).
HLC - Higher Lending Charge:
A charge which is payable by the borrower to the lender, to insure against potential loss if a home has to be repossessed or sold.
Homebuyers Report:
A type of survey report which is more detailed than a Mortgage Valuation but not as in depth as a Full Structural Survey. A Homebuyers report may not be suitable for certain types of property where a Full Structural Survey may be more relevant. If in doubt, you should seek the advice of your mortgage adviser.
I
Income Multiplier:
A method of calculating your maximum mortgage advance, which in most cases involves multiplying your gross annual salary by the income multiplier set by the Lender.
IDD - Initial Disclosure Document:
The Initial Disclosure Document is the Document that financial service providers are required to give to customers to provide them with key information about the firm and its services.
Instant Access Savings Account:
A savings account that a customer can make withdrawals from at any time, without any notice and without incurring any kind of penalty. The Cheshire provides a full range of Instant Access Accounts for a variety of needs.
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Interest Only Mortgage:
This is a mortgage where interest only is payable and the capital is intended to be repaid at the end of the term by an appropriate repayment vehicle such as an ISA, Pension or Endowment policy.
Introductory Rate:
This refers to a preferential interest rate that is sometimes offered to customers for a limited period of time, usually as an incentive to open a new account.
ISA - Individual Savings Account:
An ISA is the government’s tax-efficient savings initiative. The special tax-efficient features of ISAs mean that there are strict limits on how much you can invest in a given tax year. The Cheshire offers two distinct ISA savings accounts to help make your money go further.
J
No entries.
K
KFD - Key Facts Documents
These are the Documents which financial services firms must to give to customers and which summarise the key information that customers need to know about the firm, its services and the products they are buying. The package includes the initial disclosure document, the key facts illustration (for mortgages) and policy summary (for insurance policies).
L
Land Registry:
The Land Registry is a government organisation established for the purpose of registering legal ownership of land in the U.K. in one central register. The register takes the place of a large number of old live deeds and makes the property transfer process simpler. When you buy a property, the change of ownership must, by law, be noted at the Registry, which charges a compulsory fee based on the purchase price.
Leasehold:
You home may be freehold, leasehold or commonhold.
Leasehold is ownership of a property for an agreed number of years. When the lease expires, ownership reverts back to the freeholder.
Lender:
A person, company or financial institution that provides funds for a loan or credit agreement. A lender will be repaid by the borrower over a set period with set conditions in place.
Life Insurance:
An insurance policy that pays out a fixed lump sum in the event of your death or you being diagnosed with a terminal illness during the term of your policy.
There are two types of Life Insurance available via the Cheshire (both provided by Norwich Union). For full details of the Term Insurance & Mortgage Life Insurance policies please visit our Life Insurance page.
M
Member:
In the case of the Cheshire, a member is someone who holds a savings account or has a mortgage with the Cheshire. Cheshire members can benefit from exclusive member products and, subject to our rules, vote in our annual AGM (Annual General Meeting).
MPPI - Mortgage Payment Protection Insurance:
An insurance policy designed to cover your monthly mortgage repayments , subject to agreed terms and conditions, should you lose your job or be unable to work as a result of accident, sickness and/or unemployment. For further details of the cover we can provide through Cardif Pinnacle please visit our
Mortgage Payment Protection Insurance page.
Mortgage Calculator:
An online tool that allows a potential buyer to calculate the maximum amount they can borrow for a mortgage. If you're looking for a mortgage then why not try out the Cheshire's Mortgage Calculator?
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Mortgage Deed:
The legal document by which the lender secures the loan against the borrower's property. It can also be called a ”Legal Charge”.
Mortgage Term:
The length of time over which the mortgage is repaid.
Mortgage Valuation:
A basic survey which only checks whether the value of the property is sufficient to cover the amount of money secured against it by a mortgage.
Mutual Organisation:
A mutual organisation (like the Cheshire) is owned by its members. A mutual organisation does not have shareholders and it therefore does not have to pay dividends, so profits can be re-invested to secure better value for members.
N
Negative Equity:
A situation in which the market value of a house falls below the amount outstanding on a mortgage.
Net Interest:
The rate of interest payable after the deduction of UK Income Tax.
O
OEA - Ombudsman for Estate Agents:
Is a scheme providing a free and impartial facility for the resolution of complaints between members of the public and the estate agents they deal with to buy, sell and rent property. Cheshire Estate Agency is proud to be a member of the Ombudsman for Estate Agents scheme. To find out more about OEA you can visit the Ombudsman for Estate Agents (link opens in new window) website.
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Offset Mortgage:
A mortgage which offers the ability to reduce the interest charged by offsetting a credit balance against the mortgage debt. For example, if the mortgage balance is £200,000 and the credit balance is £50,000, interest would only charged on the net balance of £150,000.
The Cheshire does not currently provide this type of Mortgage.
Overpayments:
The ability to pay back more than the regular monthly repayment. e.g in order to reduce the mortgage term.
P
Party:
A “catch-all” legal term used to describe someone who enters into a legal document, case or argument. A “party” can be an individual, company or organisation.
Payment Holiday:
An agreement reached between the borrower and the lender, for the borrower to stop making mortgage payments for a specified amount of time.
Pension:
A sum of money paid regularly to someone for the remainder of their life, usually upon retirement from work.
For further details of how the Cheshire could help you with your pension arrangements please see our Pension Planning area of the website.
Portable Mortgage:
A mortgage that can be transferred from one property to another.
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Postal Account:
A savings account that is managed exclusively by post.
Click the following link for details of the Cheshire's Premier Postal Account.
Power of Attorney:
This is a legal document that gives somebody authority to act behalf of another person.
Premium:
When referring to insurance policies, the premium is the regular cost of maintaining an insurance policy - usually payable on a monthly basis.
Purchaser:
Another word for “buyer”.
Q
No definitions.
R
Redemption:
To pay off the outstanding balance remaining on a mortgage.
Remortgage:
Repaying a mortgage and then taking out a new mortgage with a different lender but on the same property.
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Repayment Mortgage:
Where monthly mortgage payments go towards paying off the value of the mortgage as well as the interest. If the payments are maintained, the mortgage will be paid in full at the end of the term.
Repayment Vehicle:
A savings account or policy that is designed to repay the balance of a mortgage at the end of its term. Examples include: ISA's, endowments and pensions.
RPI - Retail Price Index:
The RPI is a measure of inflation calculated
by the Office for National Statistics (opens in new window) on a monthly basis.
S
Searches:
Various searches are carried out during conveyancing of a property to identify any issues that may affect the future saleability of the property.
Secured Loan:
A loan where the borrower gives the lender some security, (usually property) in respect of the borrower’s obligation to repay the loan. This normally takes the form of allowing the lender to take possession of the security and sell it if the borrower fails to keep up the repayments.
Self Certification Mortgage:
Commonly referred to as 'Self-Cert', a Self Certification Mortgage is designed for self employed people and those in a commission based or seasonal employment, who may find it difficult to confirm their monthly income. This type of mortgage allows applicants to declare how much money they earn from employment without having to provide proof of earnings.
Shared Ownership:
Shared Ownership, also known as Shared Equity, is a type of home ownership scheme designed to help buyers purchase a property that would otherwise be beyond their financial reach. Shared Ownership allows the buyer to purchase a percentage of the property and pay rent to the owner of the remaining percentage of the property, usually a housing association or property developer.
These schemes often allow the buyer to buy a further percentage of the property over time, thus reducing the rent paid to the landlord.
Stamp Duty:
A government tax that a buyer has to pay on residential property purchases over £175,000. The percentage the buyer needs to pay varies depending on the cost of the property. For full details on the different stamp bands visit the Direct Gov (opens in new window) website.
Stock Market Linked:
Investments where the performance of the investment fund is directly linked to the performance of the stock market.
For more information visit our Stock Market Linked Investment area.
SVR - Standard Variable Rate:
Is an interest rate usually linked to the Bank of England Base Rate. Financial institutions set their own SVR rate which will fluctuate depending on market conditions. The SVR is considered the basic rate of interest charged on a mortgage.
Structural Survey:
See Full Structural Survey.
Sum Assured:
The amount paid out on the death of a policy holder.
T
Tax Free:
Exempt from both UK income tax and Capital Gains Tax.
Term of Mortgage:
The length of time, in respect of which, mortgage repayments must be made.
Title Deeds:
Documents confirming proof of ownership.
Tracker Mortgage:
A Tracker Mortgage is a mortgage with the interest rate linked to the Bank of England Base Rate (BBR) in the form of a set margin above or below the BBR for an agreed period.
A tracker mortgage give borrowers the benefit of interest rate decreases at the soonest possible moment.
Transfer Deed:
This is the document that transfers ownership in a property transaction.
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Transfer of Equity:
This is the process to change the owners of a property. e.g. putting it into a husband or wife’s name on divorce. The lender must approve the transfer before it is done.
U
Underpayments:
An arrangement whereby some mortgage lenders allow borrowers to pay less than their regular monthly payments for a specified period of time.
Unsecured Loan:
A loan where the borrowers obligation to repay is not “backed up” by any additional security. Such a loan normally carries a higher interest rate than a secured loan.
V
Valuation:
See Mortgage Valuation.
Variable Base Rate:
The variable rate of interest charged on a mortgage. This can fluctuate depending on market conditions.
Variable Rate Savings Products:
Savings and Investment products where the rate of interest can change depending on market conditions.
Vendor:
A term used to describe the seller of a property.
W, X, Y & Z
No definitions.
