Jargon Buster

Annual Percentage Rate (APR)

The true cost of the mortgage over the full term, set out as a yearly rate, including all fees, terms and interest. The calculation assumes that you maintain the mortgage for the full term. APR is a standard calculation in the mortgage industry and allows mortgages from all lenders to be compared

Annuity

A fixed sum of money paid to someone each year, typically for the rest of their life usually associated with pensions at retirement.

Bonds

when you buy bonds, you’re effectively lending money to a government or corporation to fund spending or raise capital.

Capital Gains Tax (CGT)

Tax payable on any gains over the CGT allowance from the sale or disposal of stocks or other assets subject to this tax. Tax is payable at 18% or 28% (2014/15 rates) depending on the taxpayer’s level of income.

Dividend

Payment made out of a company’s post-tax profits and distributed to its shareholders at the discretion of the company’s board of directors. This is usually expressed as pence (per share).

Equity

Another name for shares. It can also be used to refer to the amount by which the value of a house exceeds any mortgage or borrowings secured on it

Gilts

Securities issues by the government to borrow money.

Hedge Fund

A high-risk investment vehicle which uses advanced and aggressive investment financial techniques in order to make maximum gains

Income Protection

Insurance that pays a level of income in the event of long-term sickness or disability.

Inheritance Tax (IHT)

Tax on the value of an estate when a person dies. Payable on all assets over and above £325,000 at a rate of 40%. Some exemptions do apply.

Investment Trusts

A collective-investment company listed on the London Stock Exchange that invests in the shares of other companies. These have a limited number of shares and the price varies with supply and demand.

Liability

An obligation that legally binds an individual or company to settle a debt or a payment.

Security

A bank has taken security for its loan when it holds something of value. The most obvious example is where a bank takes security in the form of property ownership on a mortgage.