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Understanding mortgages
Understanding mortgages

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Compounding (of interest)
The process of receiving interest on previous interest earned (on savings accounts) or paying interest on previous interest paid (on loans).
Early repayment charges
A charge that your lender will make if you leave your mortgage before the allotted term. This usually applies to fixed-rate mortgages but can be a feature of tracker mortgages too.
Financial Conduct Authority (FCA)
The UK financial services regulatory body that has responsibility for consumer protection. [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)]
Outright ownership of a property and the land it stands on.
Ground rent
A payment made by the leaseholder of a property to the freeholder of the land on which the property is built.
Help-to-Buy ISA
An Individual Savings Account that provides a bonus from the government when used by first-time buyers to help buy a property.
A savings account where the interest or other earnings are tax-free.
ISA Allowance
The maximum amount each UK adult can deposit into an ISA account in each tax year. This allowance is set by the government.
Ownership of property for a defined term (the term of the lease, e.g. 99 years) but not of the land it stands on.
Lifetime ISA (LISA)
An Individual Savings Account that provides an annual bonus from the government. LISAs must be used either to help buy a property (if you are a first-time buyer) or to help set up a pension plan.
Maturity (of a bond or savings account)
The point in time when an investment – like a fixed-rate bond – reaches the end of its life and at which the investor is returned the sum invested and any remaining earnings (e.g. interest) on that investment.
Not adjusted to take account of price inflation. Often alternatively called ‘in cash terms’. See Real.
Notice Accounts
Savings accounts that require a period of notice – typically of between 1 and 6 months – in order to access the funds in the account without a charge. Such accounts offer slightly higher interest rates than those with no notice periods.
Adjusted to take account of price inflation. See Nominal.
Reversion rate
The mortgage interest rate applied by the lender at the end of the term of a mortgage deal – e.g. when a fixed-rate term comes to an end.
Stamp Duty Land Tax (SDLT)
A tax on the cost of property or land purchased in England and Northern Ireland. In Scotland the equivalent tax to SDLT is Land and Buildings Transactions Tax (LBTT) and in Wales it is Land Transaction Tax (LTT). The Scottish Parliament and Welsh Assembly have the power to apply their own rates for these equivalents of SDLT.
Unit trusts
Pooled investment schemes – typically in company shares – managed by fund managers.