Financial Dictionary

A bank account is a banking product where the account holder or holders sign an agreement with a financial institution that allows them to manage their money using the tools its offers without having to have it in cash.

A bank receipt is the document that a company (also known as originator, beneficiary or issuer) issues when a payer (also called receiver or debtor) makes a payment in its favour. When this transaction is carried out through the bank, the receipt is issued by the entity itself, which pays the amount into the account and then charges it to the payer.

These days, the receipt is a widely used payment method, and is used to make payments periodically or on time, especially between companies, or to pay large sums.

A bank statement is a document issued by a bank that includes the available balance and the summary of the transactions that have taken place in the bank account, credit card or financial product during a certain period of time.

A bank transfer is a transaction through which a person or entity (the payer) orders funds to be sent to the account of another person or a company (the beneficiary).

To order a transfer you need to know the beneficiary's IBAN, which stands for International Bank Account Number.

The benchmark is an index or financial reference point, which is used to make comparisons or measure how an investment performs, to analyse a fund's performance and management over a certain period of time.

The mortgage benchmark interest rate (or reference rate) is the official rate applied to variable rate mortgages. Remember that, with this type of loan, the monthly instalment will be determined by market fluctuations and, as a consequence, by these interest rates. If this interest rate rises, your instalments will go up when the bank revises your mortgage. And if it goes down, the opposite would happen.

For this reason, this benchmark is very important, as it will ultimately determine what you will be paying on your mortgage for many years to come. It may be a factor in deciding which type of loan may be of most interest to you: whether the fixed rate (which, remember, has a fixed interest rate for the whole life of the mortgage), or the variable rate (which depends on the cited benchmark interest rate, in addition to the spread, which is the fixed profit margin of each bank, and is determined by it).

The beta of an investment fund measures the variability or sensitivity of the fund's return compared to the variability in the benchmark's return caused by market fluctuations.

The BIC (Bank Identifier Code) or SWIFT (Society for World Interbank Financial Telecommunication) is an alphanumeric series used to identify and verify an account number. It is mainly used to issue transfers outside the European Union, and is an informative complement to the IBAN (International Bank Account Number), since it allows the issuing bank to be sent an encrypted message so that the receiving bank knows that it will receive the transfer and can confirm it. To understand us, this series allows banks to treat payments directly, in agile manner and without costs, which in turn lowers the cost for their customers.

The binding offer (known as FIPER before the Mortgage Law) is the document that the bank gives you when you are going to sign your mortgage. It consists of approximately five pages, and contains all the features of the loan as well as the clauses and conditions; in this way, you will be clear about the obligations that each party is going to assume, because when they are incorporated in the mortgage deed, they will be legally binding.

Bizum is an application used to send and receive money instantly between individuals using a mobile phone, without cost or commission. Because transfers can be made so conveniently, quickly and safely, it has become almost an overnight success.

When making a transaction, you enter no account number or IBAN code. Once you have associated your bank account to your phone number, you simply enter the contact number of the recipient, as if it were a mere text or WhatsApp message, and they receive the money in the account linked to their phone number.

A borrower is someone who receives an amount of money and undertakes to pay it back, together with interest, within a certain period of time (or, in other words, on a maturity date). So a borrower is basically the natural or legal person who receives a loan, having signed an agreement with a financial or credit institution, or a bank, etc. At this point, it becomes a borrower for the amount it has received. It will normally use this money to buy an asset.

Cadastral value is an administrative indicator often referred to as a home's ID number. It is determined objectively for each property based on the Land Registry records.

It is the increase in value produced by the difference between the purchase price and the higher sale price of units of stock in an investment fund.

How does taxation work for investment funds?

The capital gain is recorded by a series of taxes, the main tax being personal income tax (IRPF) but, despite this, it should be noted that the tax advantages of investment funds are one of their main advantages over other types of investments.

In financial terms, 'capital losses' refers to the loss of value that occurs as a result of the difference between the purchase price of the shares in an investment fund and their sale at a lower price.

Customer Account Code

The Customer Account Code is a series of twenty numbers (or SICA code) with which banks, savings banks and financial entities in general identified, checked and avoided handling errors in the numbers of the accounts opened in Spain. This code was adopted by the Spanish Banking Association, the Spanish Confederation of Savings Banks and the National Union of Credit Unions; and in turn it was required by the Bank of Spain for all general subsystems of cheques and promissory notes for current accounts and transfers.

Certificates of zero outstanding debt are documents that show you no longer have a mortgage with the bank or financial institution. They are usually requested when we have just paid off the mortgage and want to remove it from the Land Registry.

A cheque book is a book that contains cheques. So, what is a cheque? A bank cheque is a document that a bank gives to its customers so they can pay third parties.

Although these days there are more modern ways of performing transactions, cheques are still commonly used by small, medium-sized companies and the self-employed, since they provide immediate cash flow and security for the payee, since the stipulated amount will be cashed at the bank. The drawback is that this will have to be done at the bank branch itself, and it cannot be cashed online.

Investment funds are collective investment instruments that pool the capital (units) contributed by a group of individuals (unit holders). The entry (subscription) or exit (redemption) of investors' capital and variations in the value of the assets in which the fund invests mean that a fund's assets can increase but also decrease.

A fund's assets will change for two reasons: The funds are managed by a managing entity—in this case, Bankinter Asset Management—which identifies investment opportunities based on the strategy previously established in the investment policy of each fund (level of risk and markets in which it can invest).

This is the most commonly used system for calculating loans and mortgages. As the name implies, the repayments are constant. This means that all of the repayments are the same throughout the life of the loan, unless the interest rate changes. This is also known as the French system.

Contactless payment is a technology that allows card payments using NFC (Near Field Communication), by establishing a wireless communication and data exchange practically instantaneously between two devices that are only a few centimetres apart.

Essentially, the continuous market is the secondary market in which the securities of Spain's four main stock exchanges are listed. They operate under a single company, namely Bolsas y Mercados Españoles (BME), as a single market at national level, thus unifying the trading of investment products within the country, all of which are listed on the Madrid, Bilbao, Barcelona and Valencia stock exchanges in tandem.

A credit card is a plastic or metal card issued by a financial institution or a bank that authorises its holder to use it as a means of payment.

A credit report is a document that reflects someone's financial background, with all the information related to pending bills, debts, etc.

To prepare this report, a consultation is carried out with the different electricity, water, gas, telephone companies, insurance companies, automobile companies, etc., and our level of solvency, trustworthiness and ultimately our ability to make payments is analysed. for any debt that we contract with the lender. Obviously, the cleaner our track record, the more confidence we will inspire with the bank.

A current account is a type of demand deposit that lets customers deposit an amount of money with a bank, with the money being available to them whenever they want through cash withdrawals from the bank's branches or ATMs, or through card payments.  

The CVV (Card Verification Value) code is a number usually found on the back of credit, debit and charge cards. It is used in transactions where the credit card is not physically present, usually in on-line transactions.

Payment in lieu means delivering an asset to settle a debt. In the specific case of mortgages, when a person cannot afford to pay the instalments, they surrender the house in exchange for settling the mortgage loan. It is effectively paying off the debt with an asset instead of money. With this resource, the bank then sells the property to the highest bidder in a public auction, thus settling the debt.

A debit card is a plastic or metal card issued by a financial institution or a bank that enables us to perform various financial operations.

In the decreasing repayment system, the principal amortised is always the same. This means that the interest to be paid reduces over time, as do the repayment instalments as a result. While the constant amortisation system is known as the French system, the decreasing amortisation system is known as the German system.

The public deed of sale is a document that is registered in the Property Registry, and as such it proves that the property exists legally; it also confirms that the property is free of occupants and charges, and shows the willingness of both parties to comply with the agreement.

It means that both parties agree and will record their agreement before a notary; as such it is the last step in the process before we register our property in the Property Registry

A deposit account is a form of demand bank deposit that allows customers to earn a return on their savings, as they deposit money with the bank which pays them interest in return. The returns are determined by the period during which the money is deposited with the bank.

Fee received by the depositary of an investment fund for its depositary and custodian services. Only authorised entities may perform this service.

Depreciation and amortisation are economic and accounting terms, linked to the process that exists between the expense or depreciation of an asset, over a period of time.

The depreciation or amortisation of an asset is directly related to the goods and services: a house, a motorbike, a boat, a household appliance, etc. While the amortisation of a liability is related to the financing provided by a creditor and represents what the person or a company owes to third parties. A very common example has to do with loans we obtain from banks, payments to suppliers, taxes, salaries, etc.

Financial derivatives or futures comprise an agreement whereby two investors commit to the purchase and sale of a security (an underlying asset) at a future date (maturity date). Specifically, during this negotiation, both parties agree on the price of the transaction as well as the maturity date and all the other conditions at the present time. The buyer is thus obliged to buy the underlying asset by paying the agreed price on the agreed date. And the seller will have to sell the asset for that amount on that date.

The mortgage discount is the amount of interest that will be discounted by the bank when arranging a mortgage loan, and also purchasing other bundled products from the financial institution. Also known as discounted mortgages. Obtaining a discount on the loan is a good option to lower the price of the loan; do not forget that you are making a commitment that will last for a long time, and the less you are charged, the easier you will be able to pay.

When we talk about the Dow Jones, we are actually referring to the Industrial Average or price performance per share (DJIA), one of the world's leading benchmark stock indices. It lists the 30 most traded companies on the New York Stock Exchange (NYSE), otherwise known as the blue chips.

To feature on this index, a company must have an excellent reputation that affords them international prestige, as well as a regular and consistent track record in order to attract the largest number of investors. However, it should be noted that this is not a performance-based index, but rather an indicator of the value of its shares. And while it is not the official benchmark of the NYSE, it is the most prestigious index for monitoring the main US market, as it provides insight into the performance of the companies listed on the stock market.

Early mortgage repayment, also known as full amortisation of the mortgage, is the process that consists of repaying our outstanding debt with the bank before the end of the term contemplated in the deeds. On the contrary, if you are only repaying part of the money, it will be a partial repayment.

The early repayment fee is charged by credit institutions when we cancel a mortgage and leave it without charges, either because we have finished repaying the entire loan, or because we want to sell our property and we cannot do it if it has any outstanding charges. In that case, we can pay the mortgage and the early repayment fee with the money we get from the sale.

First-in, First-out

This is an accounting valuation method used to calculate the value of an inventory, or similar units, in relation to its cost and sale price. This inventory may be the company's products, the raw materials it uses for its work, or the components necessary to carry out this activity in the normal way. The FIFO criterion is commonly used when valuing inventories made up of expired or perishable products. It confirms the necessary order so that all the items that enter first, are released as soon as close as possible to their expiry date or obsolescence period.

Fixed income instruments are financial products whose returns (constant or variable) are defined when they are issued. The price, coupons/interim payments and final redemption value are all determined on the issuance date. During the life of the bond, securities will vary according to fluctuations in the interest rates. Fixed-income securities represent a proportional part of a loan to a private enterprise, public institution or government. The owners of the securities become creditors in proportion to their contribution.

A mortgage floor is a clause regulating the minimum interest rate for a variable-rate mortgage. These clauses are triggered when the benchmark index (Euribor) plus the spread is below a particular value.

In a foreclosure, the bank collects the loan debt if the mortgage borrower is late in paying the instalments, thus settling the outstanding account. This happens when the borrower owes between three or six monthly instalments. The financial institution will claim the overdue monthly payments and also the rest of the outstanding mortgage, charging 20 to 25% interest as a penalty and the legal costs that are generated, which the borrower must pay.

The FTSE 100 or Financial Times Stock Exchange is the stock market index comprising the 100 largest companies listed on the London Stock Exchange (LSE). It therefore shows the financial performance of the 100 largest companies by market capitalisation in the United Kingdom.

The index was created in 1984 with a starting point of 1,000 basis points. Nowadays, this indicator includes the likes of HSBC, Astra Zeneca, BP, GlaxoSmithkline, Barclays, Rolls Royce and Vodafone, and the 100 companies that comprise the index account for more than 70% of the total market value of the stocks listed on the London Stock Exchange.

A green mortgage is a sustainable mortgage. In other words, it is a loan for building, buying or doing up a property with terms and conditions based on the energy efficiency of the home being financed. It is a way to encourage the development of energy efficient buildings, and to reward sustainable facilities that reduce energy consumption. This can result in average savings of €3,000 per household per year, while reducing pollution and environmental impact.

Broadly speaking, a guarantee ensures that an obligation is fulfilled. It is classed as financial (for example, in the case of a sum of money) or personal (if the third party fulfils the obligation with their assets).

In the case of a mortgage guarantee, it guarantees payment of the loan, acting as back-up if there is a breach of the mortgage agreement (i.e. default on the monthly instalments).

High yield bonds, also known as junk bonds, are fixed-income securities issued by a company or country with a low credit rating and they tend to be rated below the investment grade. These types of bonds are characterised by a high risk of default on both interest and the principal, but they offer higher return.

IBAN is the acronym of International Bank Account Number. It is a unique code that identifies every single current account in the 34 countries that belong to the single euro payment area (SEPA).

Firstly, it is worth familiarising oneself with the concept of financial derivatives or futures.

Once we know what a future or financial derivative is, we can delve deeper into the characteristics of each of the contracts.

There are, of course, futures on different assets and indices, including the IBEX 35. As we know, this index averages the share prices and profitability of the 35 most important companies in our stock market (the Spanish stock exchange).

A mortgage with increasing repayments is one where the repayments increase progressively, at a percentage agreed by the customer and the bank. Although repaying the mortgage is cheaper at first, the payments increase over time.

The information ratio measures the relationship between the performance spread of a fund or portfolio over its benchmark, and the management risk assumed by separating it to a greater or lesser extent from the benchmark, also known as tracking error.

Insurance bundled with the mortgage relates to those policies that are either compulsory or highly recommended when taking out a mortgage loan.

To address this issue, we will first talk about the Mortgage Law (Ley Hipotecaria), as it has shed some light on the regulation of these loans. Although this regulation does not specifically regulate insurance, it does lay down that you must take out certain products when arranging a mortgage, although the bank's mediation is not obligatory and you can purchase them from another company. In other words, it prohibits selling these insurance policies as a condition for granting the loan, but it does allow the bundled selling of complementary products to lower the interest rate and improve the conditions of the mortgage loan. 

An insured pension plan (plan de previsión asegurado or PPA) is an individual long-term insurance policy there to top up our state pension under the Social Security scheme.  

When we take out a PPA, we sign an insurance policy that has the usual features of a policy: policyholder and the insured or beneficiary, who will be the same person, except in the event of the death of the insured, for which circumstance the insured must name a beneficiary.

An interest-bearing account is a type of bank account that pays the customer an interest rate in exchange for them depositing their money at the bank.

The return and interest rate offered will vary by bank and depend on the account terms and conditions. They can also change over time. This interest rate is payable on the account balance over a fixed period of time. There is typically no minimum amount of money needed to open an interest-bearing account, although the more we place in the interest-bearing account, the better the return.

The interest rate is the amount banks and financial institutions pay to their customers for the capital they invest for a period of time. From the opposite perspective, it is the price we have to pay for using money lent by a bank. Interest rates are always reported as a percentage of the capital lent by the bank or invested by the customer.

International transfers (also known as cross-border or foreign transfers) are transactions that we carry out from one source account to another destination account, which is located in another country. If we live in Spain, an international transfer will involve sending or receiving money outside the country.

These days, in a world which has become increasingly globalised in every regard, finance is no different and even more so in the business world: it is becoming more and more normal to move money internationally, and often in different currencies.

INVERCO is the Spanish Association of Collective Investment Institutions and Pension Funds. As its name suggests, it brings together all collective investment entities. 

It is a non-profit, charitable and educational association made up of the institutions that manage Spanish collective investment (funds and investment companies), Spanish pension funds and all foreign collective investment institutions that are filed with the CNMV.

'Investment grade' refers to the group of credit ratings that imply a low default risk (from AAA to BBB-). Companies with a rating in this range will issue debt at a lower interest rate than others with a poorer credit rating, allowing them to obtain financing more cheaply. 'AAA' is the highest credit rating and it is only granted to countries or companies with an extremely strong capacity to meet their financial commitments.

When we talk about investment policy in a fund, we are referring to the investment vocation of an investment fund (fixed income, equity, mixed fixed income, mixed equity, absolute return, etc.).

In an investment fund, since funds are assets without a legal personality, made up of individual contributions from different investors, when you invest in a fund, you do not acquire actual shares, but units in that fund. These units represent the investment made by each co-owner or unitholder, all of whom have owernship rights over the fund.

An investment strategy is something as simple as the “plan” we have in mind to get returns on our capital.

This plan needs to be based on two essential pillars: the method and discipline.

We talked in depth about how to create our own strategy in our Bankinter Broker Academy but we have summarised the basics here.

The internal rate of return applied to investing in financial assets refers to the discount rate that makes the net present value zero for all collections and payments derived from the subscription and possession of assets where the assumption is that these collections and payments will be reinvested or financed, respectively, at the same interest rate as the rate calculated, until maturity. For fixed-income instruments it is similar to the AER for deposits.

It is Spain's most important securities market. It is part of Bolsas y Mercados Españoles (BME), and uses the reference of the Madrid Stock Exchange General Index (IGBM), which currently has 113 stocks.

This organisation recognises market regulation as a benchmark and imposes stringent regulations on operators and intermediaries. It also falls under the Markets in Financial Instruments Directive and coexists with other new systems, such as the MTF.

Fee charged by an investment fund manager for the services provided. This fee is deducted daily from the fund's net asset value and is generally a percentage of the assets. Some funds also include a success fee that is applied to the fund's performance. The amount is stated in the fund prospectus.

This is the minimum amount needed to be able to invest in any financial product (fixed income, investment funds, ETFs, etc.) for the first time.

This is important information to bear in mind because if you transfer capital from one investment fund to another and the amount transferred is less than the minimum contribution required by the destination fund, the transfer may be declined.

A mortgage is a security instrument that allows the buyer to receive a certain amount of money from a financial institution in exchange for a commitment to return the amount loaned plus the corresponding interest in periodic payments.

Mortgage administration costs are the payments for the deeds and processing the tax settlement when we buy a property and sign, subrogate, cancel or refinance a mortgage.

The mortgage CAP (or Interest and rate hedging contract) is a way of limiting the interest rate of a mortgage from going up.

When you take out a CAP, you will pay a single premium calculated based on the interest rates at the time of arrangement, and in return a limit percentage will be set on the rise of the Euribor (the stock index to which variable rate mortgage loans are normally referenced). This cap is called the strike price. If this index exceeds the CAP, the bank must return the difference to the customer. This means that ultimately, the price of the mortgage will not rise.

Mortgage charges are financial obligations that a property carries and that are passed on to whoever buys it. Mortgage charges represent a limitation of use and ownership and can pass from one owner to another when a sale and purchase transaction takes place, so before taking the step of buying a house, you must check that the property is free of them; if not, the sale cannot be carried out.

Mortgage clips or swaps are a type of financial exchange contract, through which benefits are exchanged between the financial institution or bank and the customer.

The mortgage terms and conditions are the requirements and clauses set by the bank to grant us the loan. While the terms and conditions of all credit institutions tend to be quite similar in general, they sometimes differ in some details and in specific clauses.

When buying a house we need to do our sums first, as there are more costs than just paying for the house. These basically fall into two groups: The costs caused by the purchase and the mortgage costs. These can amount to 10% of the price of the house, so it is important we have the savings to pay them. And, in addition to that 10%, we also have to cover another 20%, which is the part of the house price that the bank won't cover, as they usually only lend up to a maximum of 80%.

Mortgage deed

The mortgage deed is an official document stating the clauses and conditions that the bank and the customer have agreed to establish a mortgage.

This document is commissioned by the bank and issued by a notary public, and must be included in the Property Registry to acquire an official and probative nature. The notary will give one copy to the bank, another to the customer, and will include a third to settle taxes. Your mortgage will condition you financially for many years, so you must check the deed carefully and be very sure before signing it.

A mortgage extension is the process of changing the terms of the mortgage loan we have arranged with our bank. It allows us to reduce the amount of the instalments, ask for slightly more money, or both. This procedure is also known as novation (novación), and it is usually cheaper than remortgaging or signing a new loan.

A grace period of a mortgage is the period over which, as holders, we stop paying the monthly instalments on the loan without incurring a penalty for late payment (meaning total grace), or where we pay interest only, thus reducing the instalments significantly (in which case it would be partial grace).

Mortgage liability is the maximum amount that a person arranging a mortgage would have to pay. This is calculated by adding together all the monetary concepts involved in the loan: the principal (i.e. the amount of the loan); the total ordinary and late-payment interest; and the costs and expenses of repossession (no more than 5% of the principal).

This mortgage situation involves the bank postponing mortgage repayments for a period. It basically involves a delay in repayments, and is subject to a specific period and certain terms and conditions. There can be many reasons for these, but they are mainly related to situations that affect the customer's payment capacity. They are subject to certain acceptance conditions. In more exceptional cases, the government or responsible authority may be in the lead on the moratorium. This is the case in the current situation caused by COVID-19).

Cadencia is when the bank reviews the interest rate payable on variable-rate mortgages. Of course this will not happen if we arranged a fixed-rate mortgage, since we will always pay the same instalment, regardless of the market performance.

When we refinance a mortgage loan, it means we change the conditions of our mortgage and adapt them to ones that suit us better.

There are three ways to do this:

Novation

First, we can renegotiate with our current bank. This case is called novation, and consists of refinancing our mortgage and reaching an agreement with our own bank. This way we can amend any clause, as long as our bank agrees with our proposals. If we choose this option, we may have to pay a fee ranging from 0.1 to 1% of the outstanding capital, depending on whether our financial institution applies this in the conditions we have signed.

Spread in a mortgage is a fixed percentage of interest which the bank charges us for lending us its money. The it is the profit it makes on giving us that capital to buy the property, and that is why each bank has its own spread. Spread can also change over the years owing to various factors. 

NASDAQ (National Association of Securities Dealers Automated Quotation) is the largest electronic stock exchange in the United States.

It includes companies from the so-called “New Economy” (electronics, IT, telecoms and biotechnology), whether US or foreign. These are the two main differences with respect to other markets or indices such as the Dow Jones (industrials) or the S&P 500 (generalist), which also do not include companies registered outside the United States.

The net asset value is the value of each unit in an investment fund.

When we decide to invest in an investment fund, we are buying units in that fund; i.e. a piece of the cake. These units have a specific price, which is what we call net asset value. This tells us the performance of the investment fund's returns.

NFC stands for “Near Field Communication”. This technology allows practically instantaneous wireless communication and data exchange between two devices that are less than 20 cm apart.

The NIR (Nominal Interest Rate) is the fixed percentage you pay to the bank solely as interest on the loan; it is the interest rate agreed between the customer and the bank. The NIR is a percentage indicator of the return for the bank of lending the money over a particular period. The NIR transparently shows the amount of interest payable on transactions such as deposits, personal loans and mortgages, depending on the chosen repayment period.

An online account is a type of bank account that the customer opens online using the bank’s website or app. The contract between the customer and the bank is signed over the internet.

Partial early repayment

The partial early repayment of the mortgage occurs when you repay the bank part of the principal that it lent you early; this will remove part of the weight without fully repaying the loan.

You can cancel and fully repay your mortgage at any time if, for example, we have saved money and want to give the loan a boost. In addition, by partially repaying your mortgage you can reduce your monthly payment, or shorten the term.

When you apply for a loan or credit, whether for yourself or a company, the bank must provide you with the repayment plan you have to comply with. This repayment plan will include a range of variables, such as the repayment period, the instalments to be paid each month, the type of fees and the percentage interest rate established when the loan was agreed.

Partial repayment of a mortgage is a procedure which returns a portion of the outstanding principal that the bank lent to us, thereby reducing or repaying the debt. There is also complete repayments, where one repays all of the debt and thus repays the mortgage early.

Management system where the aim is for the managed assets to mirror the market performance by building a portfolio that replicates the index. and this type of management is therefore also known as indexed management.

Pension funds are those assets without legal personality that are created to meet the objectives of the pension plans. Or more simply: they are a type of investment funds to manage capital from pension plans.

Customer contributions to pension plans provide them with the funds they need to invest in a variety of products (stocks, bonds, and so on), allowing them to profit from their investments. These are long-term savings products, which are designed to cover retirement and other contingencies covered by these plans.

The planning certificate is an official document that certifies the urban circumstances of a property, a plot of land or a parcel of land in a municipality. meaning it is a technical report that contains the town planning details of the building where our home is located. These characteristics and circumstances are established according to the land use planning, and in accordance with its development program.

Pledging consists of immobilising monetary assets or fixed income securities as collateral in order to obtain a financing percentage on that immobilised amount, that is, we speak of pledging to refer to a real property security.

A portfolio is a set of financial assets and investments that make up an investment fund, a person or an entity's assets.

This portfolio is also called securities portfolio and it can be made up of a combination of variable income and fixed income financial instruments. Depending on the instruments it includes, its profitability will vary.

This involves selecting the optimum return/risk combination for each investor. The investment process is therefore based on analysing the investor's risk tolerance, selecting investments and executing buy and sell orders for specific securities.

The Pre-contractual Information Sheet (known in Spanish as the FIPRE) is a transparent, generic information document that banks are obliged to provide to customers who request information about mortgages. The content of this document is regulated by legal regulations, which have been in force since 2011. It provides personalised information about the mortgage loan, the generic terms and conditions, the interest rates applied and any related products.

A prepaid card is a type of debit card that allows you to load a certain amount of money for purchases and payments until it is used up.

Products combined with the mortgage are all the products that give better mortgage loan conditions.

These products are called linked because they are associated (linked) with the spread. In other words: if you link a product to your mortgage, the spread will go down. Specifically, you could cut up to 1.3% off the spread, which could mean a saving of one 1,000 euro instalment per year.

When we are talking about properties, free of charges means that there are no attachments, debts, resolutory clauses or mortgage charges on it.

This is the first thing we have to consider when buying a property, as when we buy a home we buy it with all the debts it may have. For example, if it comes with a mortgage, we will be responsible for that charge.

If you are thinking of buying a home, you need to understand the legal situation of the property before paying a deposit or signing a deposit contract, to avoid any surprises during the purchase.

Stamp Duty and Asset Transfer Tax, better known as the ITP, is a tax on asset transfers for consideration, corporate transactions and documented legal acts.

A public instrument of purchase and sale (commonly known as an escritura) is the contract we sign before a notary public to legally formalise the change of ownership of a property from the seller to the buyer. This document is signed by the notary and also by both parties, and in the event of a legal dispute, the content of the deed is legally binding.

The escritura is typically signed at the same time as the mortgage deed. Once signed, the property can be filed at the Land Registry in our name.

A fee that the management entity may charge the unit-holder when it purchases units in an investment fund. The Fund prospectus or the quarterly report will state the amount.

It is used to see what position the fund has in terms of return obtained compared to other comparable funds.

Quartiles represent sets of 25% of the funds in the total list of funds of a specific category, grouped according to descending profitability. This means that the first quartile comprises 25% of the best funds with the highest profitability, ordered from highest to lowest, and so on and so forth with the second, third and fourth quartiles. Occasionally, larger partitions are used, such as deciles (10%) and centiles (100%).

What is a verified land registry notification?

The registration verification of a property is a verification of the circumstances of the house that we are going to buy. To obtain it, a query is made to the Property Registry and the home information, the status and the ownership is verified as coinciding with those provided by the seller, and above all, that it is free of embargos (that it is not mortgaged).

In reality, requesting this verification is a very simple procedure which is highly recommended, since the purchase of a home is a complex transaction that involves a great deal of responsibility, you have to be certain and take certain measures before taking the step to avoid subsequent surprises.

A fee that the management entity may charge the participant when it sells its units in an investment fund. The Fund prospectus or the quarterly report will state the amount.

Remortgaging is an agreement that modifies the terms of the mortgage contract. We might request if we are unhappy with the terms of our current loan (interest, fees, linked products, repayment period, or other clauses), or with the bank that manages it.

Repayment of principal is the return of the money applied for as a loan or credit. When you repay a loan, you are usually paying off both the money you borrowed from the financial institution and the associated interest.

A retainer is the money that we advance to the bank so that once it has pre-awarded the mortgage, it can carry out the procedures and finance the initial expenses of the property purchase and also those incurred on signing the loan.

Thus, the customer deposits this amount in their account and the bank holds it. As this is nothing more than an estimate made by the entity and it is quite common that once these procedures have been carried out, there is leftover money. In that case, the bank will settle the amounts with us and deposit the surplus in our account.

retirement plans are a form of life insurance managed by an insurance company and largely geared towards savings. 

The person who takes out the plan acquires the right to receive a certain amount of money upon retirement (i.e. at plan maturity), or earlier if he/she becomes disabled or dies before retiring. Retirement plans are managed by insurance companies.

Let's begin by explaining revolving facilities. A revolving facility is a credit line granted by a financial institution that can be drawn on up to its limit over a specified period of time. Revolving cards work in a similar way to credit cards: you can buy things with them and pay them off bit by bit. As you repay or“ replenish” the money, you can spend it again.

When applying for a mortgage, your risk profile will be the factor that determines your level of solvency to repay it. That is, when you request a mortgage loan from the bank, it will carry out a study that assesses your ability to meet the instalments throughout the life of the loan and pay off the debt you took out with it over the years. The result of this analysis (also known as bank scoring) will be decisive for the bank to grant you the loan, and will depend on certain aspects such as your level of income, your expenses and other loans that you have taken out at the time of applying.

A self-build mortgage is used to finance the construction of a new home and not the purchase of an existing home. In other words, it is a loan to build a house for one's own use. These mortgages were traditionally intended for property developers, who would build the houses and then repay their debt to the bank as and when they sold them.

A SEPA transfer (Single Euro Payments Area) is a transfer in euros between banks belonging to the Single Euro Payments Area.

To make a SEPA transfer, we will need to know the IBAN (international bank account number) of both the originating account and the destination account, the name of the beneficiary and the amount. The money is usually received in the destination account within one business day.

What is a share?

They are effectively the proportional units into which a company's capital is divided. Companies frequently issue shares in order to raise funds.

In other words, companies issue and sell shares in the primary market to obtain financing for the company's operations.

The value of all the shares of a company is its market capitalisation. Each share confers dividend and voting rights upon the holder (also known as the shareholder), who therefore owns a part of the company, entitling them to share in the profits or to vote at general shareholders' meetings, based on the number or proportion of shares they hold.

The Sharpe Ratio is the return offered by an investment for each unit of risk borne. The Nobel laureate for Economics, William Sharpe, was in charge of developing it, seeking to discover whether the profitability of an investment has to do with having made an intelligent decision or with having assumed greater risk. This ratio calculates profitability based on risk.

Stamp duty (AJD, for the Spanish acronym) is often known as the mortgage tax. It is applied to notarised deeds legalising the commercial and administrative documents involved in mortgage loans.

Stock indexes are essentially aggregates of a particular type of securities.

Nowadays we can find various types of indexes, each comprising a different type of instrument. For example, there are indexes by market, by sector, by company size, or by type of instrument.

They are mainly used to measure the global ups and downs of the market segment they represent and to graphically observe and depict the historical performance of that economy.

Subsidised properties (VPO) are promoted by the Government and have lower prices than similar properties on the free market.

Subsidised housing is designed to help people from disadvantaged backgrounds to own their own home (usually, lower-income households): young people, elderly people, minority groups, etc.

The SWIFT (Society for Worldwide Interbank Financial Telecommunication), also known as the BIC (Bank Identifier Code), is an alphanumeric code comprising 8 to 11 digits:

• Bank entity code (4 digits)
• Country code (2 digits)
• Branch location code (2 digits)
• Branch code (3 digits). This part of the code is optional. If it does not exist, it is assumed that the account is part of the central entity.

Territorial covered bonds are securities that banks and credit institutions in general issue with the backing of their extensive loan portfolios and loans they grant to public administration (autonomous communities, national government, etc) and other similar organisations.

These covered bonds have several additional guarantees, making them very beneficial for all parties. First, they enable entities to obtain cheaper financing. Second, this is a saving that the government can also receive, so it also benefits. Finally, investors also benefit, as they have access to guaranteed fixed income instruments giving them greater security.

The TER measures the total costs of an investment fund. On top of management and deposit fees, it also includes certain operating and administrative expenses, legal costs, etc., incurred by the investment fund. The TER is public and can be consulted in the information provided by the manager and/or marketer. Investment funds are legally bound to stipulate their main fees in the official fund prospectus regulated by the CNMV.

The duration of a bond is a measure of the average maturity weighted by all the cash flows paid by the bond. In an investment fund, the duration will be the weighted average of the durations of all the bonds that make up the fund. Duration is also used to measure the sensitivity of the bonds in a fund to changes in interest rates. The longer the duration, the greater the price sensitivity to interest rate fluctuations in the market.

The stock exchange (or securities market) may be governed by public or private organisations, which provide everything needed to trade in financial instruments.

There are different trading methods, including auction or continuous trading. There are also different instruments that can be traded, depending on the stock exchange or market in which we are trading, such as equities, debt or derivatives.

Markets are the mechanisms that allow capital to flow from those participants with surplus funds (savers) to those in need of finance (companies). This is what is known as the “primary market”.

A total payment holiday allows the borrower to defer repayment of the loan instalments for an agreed period of time.

This measures the deviation of a fund from the benchmark index as result of the securities selected. Tracking error is also used to measure the probability that a portfolio will diverge from the benchmark.

It is commonly used to analyse the regularity of a fund's returns and is a clear indicator of good management by the management team.

In stock market terms, weighting refers to the weight of a specific asset with a group of selected assets, usually an index.

Unit holders are the investors in a fund, whether individuals or legal entities, who contribute their money to an investment fund and are therefore owners of it. Their ownership rights are represented by the book entry system.

Usufruct means“ the real right of use and enjoyment of a thing or property belonging to another”. Article 467 of the Spanish Civil Code defines usufruct as: “the right to enjoy the property of others with the obligation to preserve its form and substance, unless the title of its constitution or the law authorises otherwise”.

Value at Risk“”, also known as VaR, is a statistical method for quantifying exposure to market risk. VaR measures the maximum possible loss expected for a fund or portfolio with a probability rate of 95% in a specific time frame. It is used to anticipate and control the level of risk exposure based on past performance. The investment policy of certain managed funds and portfolios takes into account the maximum VaR levels.

A virtual card is a financial instrument designed for making online payments without needing to present a physical card. Virtual cards have the same elements as physical cards, with the main difference that there is no physical card.

Volatility measures the fluctuation of a variable. In financial terms, this variable is related to market prices and its deviation over a specific of period of time is calculated.

A wallet card or electronic wallet is a prepaid card onto which users loads cash for small purchases.

The amount stored on these cards is usually small since, as their name indicates, they act as an alternative to cash, although they have many other benefits. These include:

Zero clauses are mortgage contract conditions in which the bank ensures that the minimum interest it charges is 0%. This means that the total interest charged never falls below this value, even if benchmark rates are negative.

Just having debts with various creditors can sometimes be worrying. That is why there is an option to combine or pool our loans into one. This results in a single monthly payment that is smaller than the total of the instalments on all the separate loans. This is possible because it increases the repayment period (i.e. the total final cost), generating more interest.