Money Jargon - The Letter I
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Money Crocodile knows the finance world is full of terms, phrases, buzz words and jargon. The below terms will help you with terms beginning with the Letter I
On this page we explain,
Income Multiples > Independent > Insurance > Insurance Broker > Insurance Claims > Insurance Excess > Insurance Exclusions > Interest-only Mortgage > Investment > ISA Mortgages
Income Multiples
A lender will take into account your income when considering granting a mortgage. The income multiple is the calculation implemented by a lender when assigning a mortgage amount. The lender will usually lend you upto several times your income. If you are applying for a mortgage jointly with a spouse or partner, the lender will take into account both incomes. Once you know how much mortgage you can borrow you can search for properties within your budget.
The income multiple rule is not set in stone, there are mortgage lenders who will lend more than the typical income multiples.
Independent
Independent agents are not attached to a specific finance product or provider. This usually means that the independent advisor will be able to offer you finance products from a whole range of providers and so will be able to find you a vast array of products and so a competitive deal. In order to do their job well Independent agents should ask you for sufficient information to be in a position to form a comprehensive view of your needs. The independent agent will then be able to select products from the market that will suit your requirements. They should offer you advice on the products and the best way to use them. Independent agents are obliged to give you the full details of any commission they receive on the policies and investments they recommend as well as the level of charges.
Independent financial adviser's are regulated by the Financial Services Authority and you should check that they are before you use their services.. If an adviser is not, they are trading illegally.
Insurance
Insurance protects your property, possessions, life, health, and pets against any harm, damage and theft. Should the unforseen happen it would ensure that you could avoid the hardships.No one wants harm to come to themselves their family or possessions, but unfortunately sometimes it does, so insurance policies are taken out to lessen the financial burden that could form from such adverse events.
Using the internet to shop around can save you time and receiving insurance quotes from several providers will enable you to quickly find savings on an insurance policy.
Insurance Broker
An insurance broker is often an independent agent whose works on your behalf to find you a policy from a range of insurance providers. If however the insurance broker is using the title agent or consultant you should be aware that they may be tied to a handful of insurance companies, this means they will only be able to search through the products that these insurance companies offer. You should be made aware if the broker is acting as an agent for any particular company before you choose to use their services.
Someone who works directly for an insurance company can only act as an agent for that particular company and can only recommend their insurance products and they may not be the only product that would suit your circumtances.
Insurance Claims
An insurance claim is the process you have to go through to recover a loss under an insurance policy.
When taking out an insurance policy make sure that you understand what the proceedure would be should there come a time when you need to make a claim. Understand what the exclusions are and what would make the policy invalid.
Always follow the instructions of your insurer, when claiming always be honestas your claim may be investigated.
Your insurance provider will want to provide a efficient and quick service for you, they too will not want a claim to go on for a long time as it will also cost them money.l
Insurance Excess
Insurance is simply the first part of any claim that must be covered by yourself. Often increasing your excess can significantly reduce your premium. Always check the excess in any insurance policy. Insurance excess is preset and is usually a set amount or a percentage of a insurance claim that the policy holder is responsible for paying. An excess exists to limit any fraudulent claims and reduce the risk to the insurers.
An insurance policy is a legally binding contract, you agree to pay the excess (first £X amount) of any claim irrespective of blame, this has to be paid as a condition of the claims procedure.
Insurance Exclusions
Exclusions as they apply to insurance, are specific conditions that the policy does not offer cover for. No insurance policy can cover every possible event that might arise. Insurers will put exclusions into a policy to limit their exposure to risks. An insurer will want to minimise the risks they themselves are taking in offering insurance policies. You agree to any exclusions when you take out an insurance policy with an insurer.
As an example, a health insurance policy could provide a temporary income if an injury is sustained however your claim may be deemed invalid if you received that injury whilst under the influence of alcohol and your policy excludes injuries suffered as a result of drinking.
An insurance policy is a legally binding contract with an insurer. You should make sure you are aware of excess, conditions and eclusions before you sign any contracts.
Interest-only Mortgage
An interest only mortgage is one where the payments made ont the mortgage repays the interest only not on the capital of the mortgage.
If you have a interest only mortgage, you will pay off the interest on the mortgage in monthly payments for a fixed term, usually five to seven years. Then after this term you usually can either refinance, remortgage, pay of the balance remaining with a lump sum, or start to pay off the principal loan, in which case your payments will inevitably increase dramatically. Interest only mortgages are often used by property developers or buy to let borrowers as they only need to have the mortgage for a short time before they make other arrangements.
Investment
Investment in property, is using capital in the housing market rather than the stock market. Home investment is a term which covers the performing of renovation work or improvement of a home, increasing its value.
Investment in property can be a complicated subject to cover because of the myriad of different ways to invest in property and because of the investors aims, that is what you want out of property investing.
You may be looking at buying to let, this is buying a property with the purpose of letting it out. Perhaps property redevelopment interests you, this is buying a building in need of maintenance and modernising with the intention of selling it later to make a profit. Because of the stock markets recent sluggish performance you may be looking at other ways to use your finance, such as buying a second home or buying a holiday home. You may be a home owner looking at improving your properties value, performing work on the building could lead to an increase of thousands on its market value.
ISA Mortgages
An ISA mortgage works loosely in the same way as endowment mortgages and interest only mortgages work, the mortgage holder only repays on the interest and not on the capital of the mortgage. ISA stands for individual savings account, they can be used in conjunction with interest only mortgages to pay off the loan at the end of the term.
With an ISA mortgage you will be expected to repay the interest on the loan monthly, you take out the ISA to build up a fund which will pay back the capital at the end of the mortgage term. An ISA comes with tax benefits too, as the savings that you accumulate are free from income tax or capital gains tax.
There are two types of ISA, a maxi and a mini. The government will allow you to put £7000 a year into an ISA used to back up a mortgage.
The Maxi ISA is usually a stock market account meaning that the funds are invested in the stock market. Your investment could grow rapidly. You are allowed one maxi and up to three mini ISA’s. Should the stock market fall you will pay less for the units that you are funding. However you should consider the fact that any sort of interest only mortgage carries more risks than a traditional repayment mortgage. You are taking the risk that your investment will make enough funds to pay off the capital that you borrowed, if it does not you will have to find the money somehow yourself. An ISA related mortgqage relies heavily on the stock market and you are not guaranteed to make enough funds to pay off your mortgage.
