Jargon Buster

AER

Savings & Investment

Annual Equivalent Rate. Shows what the interest rate on a savings account would be if interest was paid and compounded once each year. Used to compare savings accounts on a like-for-like basis regardless of how often interest is actually paid.

Annuity

Pensions

An insurance product where you exchange a lump sum (usually from a pension pot) for a guaranteed income for life or a fixed period. Once purchased, most annuities cannot be changed or cashed in.

APR

Mortgages & Credit

Annual Percentage Rate. The total cost of borrowing over a year, expressed as a percentage. Includes the interest rate plus most fees and charges, so allows fairer comparison between credit products.

APRC

Mortgages

Annual Percentage Rate of Charge. The mortgage equivalent of APR. Shows the total cost of a mortgage over its full term, including any fees, assuming the rate stays the same. Useful for comparing mortgages with different fee structures.

Arrangement fee

Mortgages

A fee charged by lenders to set up a mortgage. Can be a fixed amount or a percentage of the loan, and may be paid upfront or added to the mortgage (which means you pay interest on it).

Asset

Investment & Estate Planning

Anything you own that has financial value - property, savings, investments, vehicles, valuables. Used to calculate your net worth (assets minus liabilities) and your estate for inheritance tax purposes.

Attitude to risk

Investment

A measure of how comfortable you are with potential losses in exchange for potential gains. Usually scored from cautious to adventurous. Used to determine the appropriate investment strategy for your circumstances.

Base rate

Mortgages

The interest rate set by the Bank of England that influences the rates banks charge each other and customers. Tracker mortgages move directly with the base rate; fixed-rate mortgages do not (until the fixed period ends).

Beneficiary

Estate Planning & Protection

A person or organisation who receives money or assets from a will, trust, life insurance policy or pension. You can usually name multiple beneficiaries and specify what proportion each receives.

Bid-offer spread

Investment

The difference between the price you pay to buy an investment (offer price) and the price you receive when selling it (bid price). This gap represents a cost of investing.

Bond

Investment

A loan made to a government or company in return for regular interest payments and the return of capital at the end of a fixed term. Generally lower risk than shares but with lower expected returns.

Buildings insurance

Mortgages & Protection

Insurance covering the physical structure of your home against damage from fire, flood, storms etc. Required by mortgage lenders. Separate from contents insurance which covers your belongings.

Buy-to-let

Mortgages

A mortgage taken out specifically to buy a property to rent out to tenants. Typically requires a larger deposit (usually 25%+) and is assessed based on expected rental income rather than personal income.

Capital

Mortgages & Investment

The original amount of money borrowed (for a loan) or invested (for an investment). On a repayment mortgage, you pay back both capital and interest each month. On interest only, you only pay the interest.

Capital gains tax (CGT)

Tax

Tax on the profit when you sell an asset that has increased in value. Applies to things like investments and second properties, but not your main home in most cases. Everyone has an annual tax-free allowance.

Cashback mortgage

Mortgages

A mortgage that pays you a lump sum after completion, typically £250-£1,000. Often offered on higher rates, so the cashback may be outweighed by extra interest over the term.

CCJ

Credit

County Court Judgment. A court ruling against someone who has not paid money they owe. Stays on your credit file for six years and can significantly affect your ability to get a mortgage or credit.

Chartered Financial Planner

Advice

An advanced professional qualification awarded by the Chartered Insurance Institute. Demonstrates a high level of technical knowledge, experience and ethical standards in financial planning.

Compound interest

Investment & Mortgages

Interest earned not just on your original capital, but also on the interest already added. Over long periods this dramatically increases growth (or, on debts, the amount owed). Often called “the eighth wonder of the world.”

Conveyancing

Mortgages

The legal work involved in transferring ownership of a property from one person to another. Usually carried out by a solicitor or licensed conveyancer.

Critical illness cover

Protection

Insurance that pays a tax-free lump sum if you are diagnosed with a serious illness listed in the policy (e.g. cancer, heart attack, stroke). Different from life insurance which only pays out on death.

Decreasing term assurance

Protection

A type of life insurance where the payout reduces over time, designed to mirror a repayment mortgage balance. Cheaper than level term cover but only suitable if the cover need decreases.

Deposit

Mortgages

The portion of a property purchase you pay yourself, with the rest borrowed via a mortgage. Larger deposits usually unlock better mortgage rates because the loan-to-value is lower.

Discounted variable rate

Mortgages

A mortgage where you pay the lender’s standard variable rate minus a set discount for an initial period. Payments can change if the lender changes their SVR.

Diversification

Investment

Spreading investments across different asset types, sectors and regions to reduce the impact of any one investment performing badly. Often described as “not putting all your eggs in one basket.”

Drawdown

Pensions

A way of taking money from your pension where the pot stays invested and you draw an income from it. Unlike an annuity, drawdown gives flexibility but the pot can run out.

Early repayment charge (ERC)

Mortgages

A fee charged by a lender if you repay your mortgage early or overpay above a certain limit during a fixed or tracker deal. Usually a percentage of the outstanding balance, reducing each year.

Endowment

Investment & Mortgages

A type of long-term savings plan, historically often used to repay interest-only mortgages. Many endowments sold in the 80s and 90s failed to grow enough to repay the mortgage, causing shortfalls.

Equity

Mortgages

The portion of your property that you own outright - the property value minus any outstanding mortgage. Increases as you pay down the mortgage and as property values rise.

Equity release

Mortgages & Retirement

A way for older homeowners (usually 55+) to access cash tied up in their home without selling it. Comes in two main forms: lifetime mortgages and home reversion plans. Specialist advice is required.

Estate

Estate Planning

All your assets and possessions at the time of death, including property, savings, investments, vehicles, valuables and personal belongings. Minus any debts. Used to calculate inheritance tax.

Execution-only

Investment & Mortgages

When you arrange a financial product without taking advice - you make the decisions yourself based on your own research. Cheaper than advised services but you have no recourse if it turns out to be unsuitable.

Executor

Estate Planning

The person named in a will to be responsible for administering the estate after death. Includes paying debts, taxes and distributing assets according to the will.

FCA

Regulation

Financial Conduct Authority. The UK regulator for financial services firms. Anyone giving regulated financial advice must be authorised by the FCA. You can check this on the FCA Register.

Final salary pension

Pensions

A type of defined benefit workplace pension where retirement income is based on your salary and length of service. Increasingly rare in the private sector but common in public sector roles.

First-time buyer

Mortgages

Someone purchasing their first residential property. Often eligible for stamp duty relief and specific mortgage products. The HMRC definition is anyone who has never owned a property anywhere in the world.

Fixed-rate mortgage

Mortgages

A mortgage where the interest rate is locked in for a set period (typically 2, 3, 5 or 10 years). Payments stay the same during the fixed term regardless of base rate changes.

FOS

Regulation

Financial Ombudsman Service. The free, independent service that resolves complaints between consumers and financial firms. You can usually escalate to FOS if you can’t settle a complaint with the firm directly.

FSCS

Regulation

Financial Services Compensation Scheme. The UK’s compensation fund of last resort if an authorised financial firm fails. Protects savings (up to £85,000 per bank), investments and insurance.

Fund

Investment

A pooled investment where money from many investors is combined and managed by a professional fund manager. Allows access to diversified investments with relatively small amounts of money.

Gilts

Investment

Bonds issued by the UK government. Generally considered very low risk as they’re backed by the government. Used by investors seeking stable income and capital preservation.

Ground rent

Property

A regular payment made by the leaseholder of a property to the freeholder. Common in flats and some new-build houses. New leasehold houses sold since 2022 have ground rent capped at zero.

Guarantor

Mortgages & Credit

Someone who agrees to repay a loan or mortgage if the main borrower can’t. Often a parent helping a first-time buyer. The guarantor takes on legal responsibility for the debt.

Help to Buy

Mortgages

A government scheme (now closed to new applicants) that helped first-time buyers purchase a property with just a 5% deposit, by providing an equity loan of up to 20% (40% in London).

HMO

Property

House in Multiple Occupation. A property rented out by three or more tenants who are not from the same household. HMOs require specific licensing and have additional regulations.

Home reversion plan

Equity Release

A form of equity release where you sell all or part of your home to a provider in exchange for a lump sum or regular income, while retaining the right to live in the property rent-free for life.

IHT

Estate Planning & Tax

Inheritance Tax. A tax on the estate (money, property, possessions) of someone who has died. Currently charged at 40% on amounts above the nil-rate band (£325,000) and residence nil-rate band (£175,000).

Income protection

Protection

Insurance that pays a monthly income if you can’t work due to illness or injury, until you return to work, retire, or the policy ends. One of the most undervalued protection products.

Independent financial adviser (IFA)

Advice

A financial adviser who can recommend products from across the whole market, rather than being restricted to a specific provider or range. Required to act in the client’s best interests.

Index-linked

Pensions & Investment

A product or payment that increases in line with a specific index, usually inflation (CPI or RPI). Common in pensions and some bonds. Helps maintain purchasing power over time.

Inflation

Economics

The rate at which prices rise over time, reducing the purchasing power of money. Measured in the UK by the Consumer Prices Index (CPI). Even modest inflation significantly erodes savings over decades.

Interest only mortgage

Mortgages

A mortgage where you only pay the interest each month, with the full original loan amount still owed at the end of the term. Requires a separate plan (called a repayment strategy) to repay the capital.

ISA

Savings & Investment

Individual Savings Account. A UK tax-free wrapper for savings or investments. Annual allowance currently £20,000. Comes in several types including Cash ISA, Stocks & Shares ISA, and Lifetime ISA.

Joint mortgage

Mortgages

A mortgage taken out by two or more people, typically partners. Both are equally liable for the full debt. Useful for combining incomes to borrow more, but creates shared financial responsibility.

Land Registry

Property

The government body that keeps records of property ownership in England and Wales. The Title Register and Title Plan together prove who owns a property.

Leasehold

Property

Owning a property for a fixed period (the lease term), with the land owned by a separate freeholder. Common in flats. Leases under 80 years can affect mortgage availability and property value.

Level term assurance

Protection

Life insurance that pays out a fixed lump sum if you die during the policy term. The payout stays the same throughout, making it suitable for interest-only mortgages or family protection.

Lifetime ISA

Savings & Investment

A type of ISA for those aged 18-39 to save for their first home or retirement. Government adds a 25% bonus on contributions up to £4,000 per year. Penalties apply for non-qualifying withdrawals.

Lifetime mortgage

Equity Release

The most common type of equity release. A loan secured against your home that you don’t need to repay until you die or move into long-term care. Interest accrues but can be repaid voluntarily.

Limited company

Tax & Business

A separate legal entity from its owners. Increasingly used by property investors and contractors. Different tax treatment from personal ownership - usually with both advantages and disadvantages.

LISA

Savings & Investment

See Lifetime ISA.

LTV

Mortgages

Loan to Value. The size of your mortgage as a percentage of the property value. Lower LTV (bigger deposit) usually gets better interest rates. Common LTV bands: 60%, 75%, 85%, 90%, 95%.

MIRAS

Tax (Historic)

Mortgage Interest Relief at Source. A historic tax relief allowing you to reduce mortgage interest costs against tax. Phased out by 2000. Not to be confused with the current restrictions on buy-to-let mortgage interest relief.

Mortgage in principle

Mortgages

An indication from a lender of how much they’d likely lend you, based on initial information. Not a binding offer but useful when house hunting. Sometimes called an “agreement in principle” (AIP).

Mortgage term

Mortgages

The total length of time over which the mortgage is to be repaid. Typically 25 years historically, but increasingly 30-35+ years to keep monthly payments manageable.

Negative equity

Mortgages

When the outstanding mortgage on a property is greater than the property’s current market value. Can make it impossible to sell without finding extra money to cover the shortfall.

Nil-rate band

Estate Planning & Tax

The amount of your estate that can be passed on free of inheritance tax. Currently £325,000 per person. An additional residence nil-rate band of £175,000 may apply when leaving the main home to direct descendants.

Offset mortgage

Mortgages

A mortgage linked to a savings account. The savings balance reduces the mortgage balance interest is calculated on, saving interest while keeping access to the savings. Useful for higher-rate taxpayers.

Open market value

Property

The price a property would sell for between a willing buyer and willing seller in normal market conditions. Used for valuations, mortgage calculations and tax purposes.

PCP

Credit

Personal Contract Purchase. A car finance product where you pay deposit, monthly payments, then a large balloon payment at the end (or hand the car back). Common but can have hidden costs.

Pension freedoms

Pensions

Changes introduced in 2015 giving people over 55 (rising to 57 in 2028) much more flexibility in how they access defined contribution pensions. No longer required to buy an annuity.

Pension Lifetime Allowance

Pensions (Historic)

A limit on the total pension savings you could build up without extra tax. Abolished from April 2024 and replaced with lump sum allowances on tax-free cash withdrawals.

Permitted development

Property

Building works that can be done to a property without needing full planning permission. Subject to limits and conditions. Relevant for property improvements and extensions.

Porting

Mortgages

Transferring an existing mortgage deal to a new property when you move home. Useful for avoiding early repayment charges. Subject to the lender re-approving you and the new property.

Probate

Estate Planning

The legal process of dealing with the estate of a person who has died. Includes proving the will (if any), paying debts and tax, and distributing assets to beneficiaries.

Remortgage

Mortgages

Replacing an existing mortgage with a new one, either with the same lender or a different one. Usually done at the end of a fixed deal to avoid the lender’s standard variable rate.

Repayment mortgage

Mortgages

A mortgage where each monthly payment covers both interest and some of the original loan, so the balance reduces over time. At the end of the term, the mortgage is fully repaid.

Repayment strategy

Mortgages

The plan for repaying the capital owed at the end of an interest-only mortgage. Must usually be evidenced to the lender. Can include investments, savings, downsizing or other assets.

Residence nil-rate band

Estate Planning & Tax

An additional inheritance tax allowance (currently £175,000 per person) for those leaving their main home to direct descendants. Combined with the standard nil-rate band, allows up to £500,000 per person tax-free.

Retained profit

Tax & Business

Profit kept within a limited company rather than paid out as dividends. Subject to corporation tax. Useful tax planning tool for owner-managed businesses.

SDLT

Tax & Property

Stamp Duty Land Tax. The tax paid when buying property in England or Northern Ireland. Rates vary based on price, whether you’re a first-time buyer, and whether it’s an additional property.

Self-invested personal pension (SIPP)

Pensions

A type of personal pension giving you more control over investment choices than standard personal pensions. Can hold a wider range of assets including commercial property.

Service charge

Property

A regular payment made by leaseholders towards the costs of maintaining and managing the building. Includes things like insurance, repairs, communal area cleaning. Varies hugely between properties.

Shared ownership

Mortgages & Property

A scheme where you buy a share (usually 25%-75%) of a property and pay rent on the rest, which is owned by a housing association. Can usually staircase up to 100% over time.

SIPP

Pensions

See Self-Invested Personal Pension.

SMI

Benefits

Support for Mortgage Interest. A government loan (not a grant) that helps homeowners on certain benefits pay the interest on their mortgage. Only kicks in after 9 months on benefits. Accrues its own interest.

Stamp duty

Tax & Property

See SDLT.

Standard variable rate (SVR)

Mortgages

The lender’s default mortgage rate, usually higher than promotional rates. Mortgages typically revert to SVR at the end of fixed or tracker deals - which is why remortgaging is so important.

State pension

Pensions & Benefits

The pension paid by the government once you reach State Pension age. Currently £230.25/week for the full new State Pension (rising to £241.30 from April 2026). Based on National Insurance contributions.

Stocks and shares

Investment

Units of ownership in companies. Generally higher risk than cash or bonds but with higher long-term return potential. Held individually or through funds.

Survey

Mortgages & Property

An inspection of a property’s condition. Three main types: mortgage valuation (basic, for the lender), HomeBuyer report (mid-level) and full structural survey (most detailed). Always worth getting more than the basic valuation.

Term assurance

Protection

Life insurance that runs for a fixed period (the term). Pays out a lump sum if you die within the term, nothing if you survive it. Cheaper than whole-of-life cover.

Title deeds

Property

The legal documents proving ownership of a property. In most cases now held electronically at the Land Registry rather than as physical documents.

Tracker mortgage

Mortgages

A mortgage with an interest rate that tracks (follows) another rate, usually the Bank of England base rate, with a set margin added. Payments move up and down as the base rate changes.

Trust

Estate Planning

A legal arrangement where assets are held by trustees for the benefit of beneficiaries. Used in estate planning to control how and when assets pass, reduce inheritance tax, or protect vulnerable beneficiaries.

Underwriting

Insurance & Mortgages

The process where insurers and lenders assess your application - your circumstances, health, financial situation - to decide whether to offer cover or lend, and on what terms.

Universal Credit

Benefits

The main UK benefit for working-age people on low incomes or unable to work. Has a mandatory 5-week wait before the first payment. Standard allowance: £400.14/month single 25+, £628.10 couple (2026/27).

Valuation

Mortgages & Property

An assessment of a property’s market value, usually carried out by a surveyor on behalf of a mortgage lender. A basic valuation is not a survey - it doesn’t assess condition.

Vesting

Pensions

In pensions, the point at which you become entitled to benefits - usually after a certain period of service in a workplace scheme. Also refers to when share options become exercisable.

Volatility

Investment

How much the value of an investment moves up and down over time. Higher volatility means bigger swings. Often used as a measure of risk, though long-term investors can usually ride out short-term volatility.

Whole of life insurance

Protection

Life insurance with no fixed term - it pays out whenever you die, as long as premiums have been maintained. More expensive than term insurance because a payout is guaranteed.

Will

Estate Planning

A legal document stating how you want your estate distributed after your death. Without a valid will, your estate is distributed according to the rules of intestacy, which may not match your wishes.

With-profits

Investment & Pensions

A type of investment fund where the insurer smooths returns by holding back gains in good years to pay out in poor years. Once popular for pensions and endowments, now declining.

Yield

Investment

The income return on an investment, expressed as a percentage of its current value. For shares this means dividends; for property it means rental income. Different from total return which also includes capital growth.