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Definition of terms


Finance can be a difficult enough subject to grasp without all the confusing terminology making things more obscure, this is why we have created a glossary for you to refer to, which will help you understand some of the language you may encounter when it comes to topics such as pensions, mortgages or investments.


Application fee

As part of the initial set up fee this allows you to secure a particular mortgage rate and can usually be added on to the loan amount.

Valuation fee

Mortgage lenders require a basic valuation of the property to assess its condition and make sure it is worth the amount of money you are paying for it, their fee is usually added to your bill.

Legal fees

When lenders incur legal fees they usually automatically pass this cost on to you which is determined by their solicitors, you will also need a firm of solicitors to deal with conveyancing on the property.

Protection fees

Although you are only required to have a basic amount of building cover in place, it is wise to consider taking out additional protection for your home, such as contents insurance and mortgage protection insurance.

Survey fees

You are only required by mortgage lenders to have a basic valuation of the property, but often for peace of mind chartered surveyors are instructed to perform additional surveys assessing internal as well as external risks to the property.

Stamp Duty fee

If you are purchasing a property over 125,000 then you will be subject to stamp duty, the further over the threshold the property is the more stamp duty you will have to pay on that property.

Early repayment fee

This can be applicable to mortgages with fixed or discounted rates if you pay off all or some of your mortgage within a specified period of time. It is always best to ask if there are potential additional charges to your mortgage before agreeing to take it out with your lender.

Exit fee

When you finish paying off your mortgage or if you wish to switch mortgage providers, you can often be charged an exit fee. This fee usually covers administration costs, and the amount you will be charged can be found in your contract.

Land Registry fee

If the property you are purchasing has been registered with the land registry, then you will need to pay a fee to have the necessary changes made and have the property registered in your name.

Higher Lender fee

When you want to borrow over 75% of the property value you may find yourself subject to this fee, the size of the fee depends on the size of the loan you are taking out. This can be a fairly rare charge to encounter as most lenders only apply this fee to a mortgage with loan to value (based on the percentage of the property you wish to borrow) so if you have over a 10% deposit you most likely won’t be subject to this charge.

Interest only mortgage

With an interest only mortgage option you will be making monthly repayments that only pay off the interest of the loan.

Repayment mortgage

With a repayment mortgage you will be paying off some of the interest and the capital each month, which means that by the end of the term you will have paid off the entire loan.

Fixed Rate

The interest rate on your mortgage will be fixed for an agreed period of time dependant on your mortgage of choice, when this time period is over your rate will rise or fall with the standard variable rate.

Discounted Rate

You will receive a discount on the interest of the standard variable rate (SVR) after the time period for this rate has completed your interest rate will revert back to the lenders SVR.

Tracker Rate

Your mortgage will rise and fall in line with the Bank of England base rate allowing you to benefit from a low rate with reduced mortgage repayments

Standard Variable Rate

Your mortgage will rise and fall according to your mortgage lenders standard variable rate, factors affecting the rise and fall is usually the bank of England base rate, the rising or falling investment rates and market conditions.

Capped & Collared Rates

Your mortgage rate will rise and fall in line with the lenders standard variable rate, but you are protected as the rate will never rise above the agreed cap, if the lenders standard variable rate falls below the cap you’ll pay the bottom end of the cap. At the end of the capped rate period you will go back to the lenders standard variable rate.

Droplock Mortgage

This mortgage is designed to let you take advantage of low interest rates but allow you to switch to a fixed rate at any time without any additional charges, this offers you protection should the interest rates begin to quickly rise.

Offset Mortgage

This is a flexible mortgage that will link to your savings or current account, the balance in your account will be subtracted from your mortgage, so you’ll only pay the amount of interest on your mortgage minus the amount in your bank account.

Buy to Let

A buy to let mortgage usually requires a modest deposit with lenders looking at not just your income and credit rating, but the potential return rate as part of the lending criteria.

Joint Mortgage

This is where you will be sharing ownership with a friend, a family member or a partner which will ease the financial burden and make both of you responsible for paying the mortgage. Usually a contract is drawn up outlining who owns what percentage of the property and put what money forward.

Parental Help

Due to economic constraints, the volatile interest rates and the current market condition it can be hard for first time buyers to get on the property ladder at all. Sometimes parents act as guarantors on a mortgage or may assist in building a decent deposit, depending on your circumstances and your parent’s circumstances you may be able to reduce payments or borrow more.

Joint Tenants

As joint tenants you will both own the property equally, and should either of you die the property automatically passes to the remaining living owner.

Tenants in Common

Both you and your partner will own the property, however you will each own shares of the property which you are free to sell or pass on to anyone you wish when you die.

Shared Equity

You will not have to share ownership, with this option you will have to take out a mortgage and an equity loan to finance the purchase of the property, you will also need a deposit as well. You are usually charged a low rate on the equity loan for the first few years of it being taken out. When it comes to the time you eventually do sell your property you will need to pay off the mortgage, the loan and a proportion of the increase in equity, if there has been any over the time of your ownership.

Shared Ownership

You will own a share of the property with another party, this will usually be a housing association and you will pay them rent on their half of the property, as well as pay a reduced mortgage payment on your share of the property. This reduces costs and comes with the idea in mind that eventually you will increase your share of ownership, until you own all of the property.

Rent to Buy

This allows you to rent with the future expectation that you will eventually buy the property at an agreed price. This will ensure that you have protection in place should the market property prices rise, and usually the rent you have paid is given back to you which you can then put forward as a deposit.

Repossessed Property

Repossessed properties can be an excellent way of picking up a property at a reasonable price, although mortgage lenders aren’t keen on disclosing how many repossessed properties they have, you are entitled to ask if there are any deals available. Keep in mind that some repossessed properties may require some work.

Property Auctions

Property auctions are organised by mortgage lenders as a way of selling repossessed properties, you do have to take into account the certain risks involved with buying at auction, such as the fact that the typical surveys have not been conducted before bidding begins.

Buildings Insurance

Essential for your home, it covers everything from property structural damage including out buildings to permanent fixtures such as kitchens. You’ll also be protected from buildings risks such as vandalism, fire, storm damage and flooding.

Contents Insurance

Cover that protects your possessions both inside and outside of the home from theft, loss and damage, cover is very affordable and can make all the difference when it comes to treasured family items.

Mortgage Protection Insurance

A mortgage is a large and lengthy commitment, and with the unstable economic climate it’s sensible to consider taking out insurance that will cover your mortgage payments should you lose your job or become too ill to work.


Company Pensions

Company pension schemes are set up by employers to ensure that their employees are provided for when they reach retirement, these schemes are usually beneficial to join as traditionally the employer as well as the employee contributes to the pension pot.

Depending on the pension scheme there are three ways you can make contributions; usually this is done by money taken directly from your salary, by your employer or by both of you. Any contributions you do make will receive tax relief, increasing the value of your pension.

Private Personal Pensions

A private pension scheme allows you to contribute as much to your pension pot as you wish, and you will receive an annual tax free allowance on contributions you make. These pension schemes are useful if you are not working or are self-employed, but they can also be a good way for people to top up their work place pension or a state pension. Everyone can benefit from a personal pension and there is a wide variety of flexible private pension schemes to suit different circumstances and needs

Stakeholder Pensions

Stakeholder pension schemes work a little differently from the traditional pension plans, you will contribute money to a pension plan through your working life but the managers of the pension scheme will choose how to invest your contributions. When you do reach retirement the value of your pension will be determined by how well the investments have performed and the amount of contributions you have made. This pension would be more suitable for those who have a relaxed attitude to risk as you will need to bear in mind that investments can fluctuate in value both up and down.

Self-Invested Personal Pension

A self-invested personal pension plan gives you more freedom and control over the planning of your fund, for those who are financially savvy it provides a greater involvement in managing the fund and devising the investment strategy, or you can choose a financial advisor to help you with the execution and management of the fund. 

If you are interested in an SIPP then please contact one of our advisors today who will be able to help you assess if this is the right option for you.

Income Drawdown Pension

This is an unsecured pension scheme that allows you to make withdrawals from your pension fund (up to a certain amount) while the rest of your pension fund remains invested. It’s a good solution for those who anticipate they made need the money in difficult financial times ahead, although the earliest you are allowed access to this fund is the age of 55. There is also a flexible drawdown option that allows individuals to withdraw as much or as little of their pension fund as they want, based on certain circumstances and fund value. 

State Pension

A pension that everyone is entitled to providing they reach national retirement age and have worked at least 30 years, or received national insurance credits from unemployment benefit. The pension forecast predicts a single person at retirement age will receive just over £100 a week, this is why we recommended you contribute to other schemes so you can enjoy a good retirement lifestyle, but it’s always worth remembering that the state pension can help make up any shortfall from other investments.


An annuity is a product you buy with your pension savings to provide a guaranteed regular income for the rest of your life. There are lots of different annuities that have different features and vary in price, but usually an annuity can be quite expensive. It’s also a massive financial decision that you shouldn’t take lightly, as once you have bought an annuity that’s it, your retirement money has gone and it’s your annuity that you are dependent on, you cannot switch or sell it later on.

Annuity Rate

This term describes the rate of the return you will receive after you have purchased an annuity with the money you have been saving in your pension scheme. 

Pension Transfer

This is when you want to transfer your current pension to another provider, or perhaps you have left your old job for a new one and would like to transfer your old company pension to your new employer because of better benefits. Transferring a pension can be complicated and usually it is a good idea to leave your pension where it is if you are part of a salary related scheme.

Compound Interest

Pensions are usually the best way to save for retirement because of compound interest.

This is when you put money into a pension and make a return on it, the next year you make a return on your original investment and last year’s return, basically making gains upon gains. If you have been saving in to a pension plan for a large amount of time then you will be in a better position to reap the benefits of compound interest, as the longer you have been saving the more the interest piles up.

Lifetime Allowance

A lifetime allowance is the maximum amount of money you are allowed in your pension fund before you are liable to pay tax on it, currently this amount stands at 1.8 million.

Endowment Assurance

This is a life insurance policy which is designed to pay a lump sum to whoever you nominate upon the completion of a specified amount of time, or upon your death.


Inflation is where there is an increase in prices but the value of money decreases, inflation has caused a great deal of problems with the economy and causes an impact in almost every aspect of society, but most directly it affects peoples salaries and standard of living.

Accrual Rate

Accrual rate is a term used to describe the way we calculate how you have built your pension fund. The rate is multiplied by your earnings to work out how much money you will eventually be entitled to.

Investment Risk

This refers to the fact that some pensions have more of a possibility of losing value than others, due to the fact that they have a greater exposure to risk. There are a wide variety of pensions that range from safe to high risk and often people choose to combine two or three pensions with varying risk exposure to balance their retirement portfolio.


Active Management

Fund managers monitor a portfolio of assets, tracking their progress and making any necessary changes to take advantage of any opportunities within the market they deem profitable at the time.

Actively Managed Funds

A fund manager will buy and sell various investments with the goal of outperforming an investment benchmark index, because the fund manager is using their skill to select investments that will hopefully outperform the market, you will have to pay a higher fee.


A bond is considered a fairly low risk investment where you loan money to a company, local authority or government and you receive a regular income from the interest until the loan is repaid.

Bull Market

A bull market is a term that is used to describe the market when the prices are seen to be rising and are expected to continue to rise in the near future.

Bear Market

A bear market is a term used to describe the state of the market when prices are falling or are expected to fall in the near future.


A benchmark describes the point to which fund managers measure and assess the risk and performance of a portfolio; there are a great variety of benchmarks for a large variety of investments that exist.

Cumulative Performance

This term refers to the performance of a fund over a specified period of time (usually a year) if the fund has performed well, then it is reflected by the fund price being raised higher.


This is a generic term describing financial products that have been based on other existing financial products.


By having a wide range of investments with varying degrees of risk you are lowering your exposure to risk and market underperformance. You should try to have a portfolio of investments ranging from low to medium risk, ensuring that you make returns but your capital is mainly safe.

Emerging Markets

This term is used to describe countries or financial markets which are less developed or established than highly industrialised or established countries such as the USA, UK or China, but have high growth potential.

Fixed Term Investments / Structured Products

This is when you have an investment which is dependent on the performance of an asset or an index within the stock market.

Financial Services Compensation Scheme (FSCS)

This is a compensation scheme which will provide compensation if an individual has suffered a loss as a result of an FSA authorised firm being unable to pay a claim or ceases to trade. This scheme is usually a final resort to cover a variety of savings, deposits, insurance policies and investments.

Growth Fund

This is a fund which focuses on building the value of the capital invested, usually all of the income generated is reinvested and then when the investor decides enough growth has been achieved they go on to sell their investment.


This refers to when the income that has been earned is based on the original capital that has been invested. Interest in investment is paid to clients in exactly the same way it appears within a savings account, and in that respect investment interest and savings account interest is very similar.

Inflation (investment)

This is when the value of money decreases and there is an increase in the level of prices for various goods and services. This is why there is a strong opinion that your money is at just as much risk in a savings account as it would be when invested, because inflation would chip away at it.


This is a savings account that allows you to save your money without having to pay tax on the interest you receive from the savings. You have a tax free limit of up to £11,280 for each year and only just over half of that is allowed to be invested in one ISA with the remainder to be invested in both stocks and shares, or an ISA from another provider.


This refers to the end of a specified time period within an investment plan, where the original capital is repaid to you.


This is when a fund employs different managers to run the various different elements within a fund due to varying expertise in certain investment fields. The idea behind this management style is to lower risk by having a variety of different skills, management styles and experience to benefit the fund.


By having regular assessments of your portfolio you will be able to see the progress of your investments and changes you need to make to reach your investment goals.


Risk refers to the exposure your investment would have to underperformance within the market, below are some of the various types of risk which we have broken down for you.

Capital security

This is the potential risk that the money you have invested will decrease falling below your original investment.

Shortfall risk

This is the term used to describe when your investment doesn’t perform well enough to meet a specific goal.

Interest rate risk

This is when you commit to a product that provides a fixed return over a specified period and the interest rates go against you.

Income risk

This is when your investment is at risk of underperforming and not producing the income you need.

Inflation risk

The risk of inflation affects the returns you make and the money you have invested decreasing its value.

Company Registration Number: 08318842

Taylor Rose Financial Services Limited is an Appointed Representative of Intrinsic Financial Planning and Intrinsic Mortgage Planning who are authorised and regulated by the Financial Conduct Authority. Taylor Rose Financial Services Limited are registered in England and Wales.

Registration Number: 08318842 Registered Address: Northminster House, Northminster, Peterborough, PE1 1YN

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