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Money words, explained
The terms banks, insurers and advisers use, in words normal people use. Free to everyone, nothing to fill in.
Nobody is born knowing these. If someone has ever used one of these words at you and you nodded along rather than asking, this page is for you. Asking is not a weakness. It is the whole job of a good adviser to explain.
Borrowing
| Principal | The amount you actually borrowed, before interest. |
| Interest | What the bank charges you for using their money. |
| Fixed rate | Your rate is locked for a set time. Certainty, but a fee if you break it early. |
| Floating rate | Your rate moves with the market. Flexible, less predictable. |
| Refinancing | Moving your loan to a different bank or a different structure, usually for a better deal. |
| Equity | The part of your house you actually own. Value minus what you still owe. |
| LVR | Loan to value ratio. Borrowing $400,000 on a $500,000 house is an 80% LVR. |
| Pre-approval | The bank saying in advance roughly what it will lend you. Not a guarantee, but close. |
| Servicing | Whether the bank believes you can afford the repayments, tested at a higher rate than today's. |
Saving and investing
| KiwiSaver investment | New Zealand's work based savings scheme. You, your employer and the government all put money in. |
| Fund | A pool of investments your money sits in, managed for you. |
| Growth assets | Shares and property inside a fund. More growth over time, more ups and downs along the way. |
| Conservative, balanced, growth | Fund types, from least to most growth assets. The right one depends on when you need the money. |
| Compounding | Earning returns on your returns. It looks like nothing for years and then it does the heavy lifting. |
| Member tax credit | The government's yearly top up to your KiwiSaver, up to $260.72. |
| PIR | The tax rate on your KiwiSaver investment earnings. Having the wrong one set is a common and expensive mistake. |
Insurance
| Premium | What you pay, usually monthly, to hold the cover. |
| Sum insured | The amount the policy would pay out. |
| Excess | The bit you pay yourself on a claim. A higher excess means a lower premium. |
| Wait period | How long you wait before an income protection policy starts paying. |
| Benefit period | How long it keeps paying once it starts. |
| Own occupation | Pays if you cannot do your own job. Better than "any occupation", which only pays if you cannot do any job at all. |
| Pre-existing condition | Something you already had before the policy started. Usually excluded, at least at first. |
| Underwriting | The insurer working out whether, and on what terms, they will cover you. |
Advice
| Financial advice provider | A business licensed to give financial advice in New Zealand. |
| FSP number | The registration number of that business. Ours is FSP1009635, and you can look it up. |
| Commission | What the product provider pays the adviser when you take up a recommendation. It should always be disclosed to you before you decide. |
| Disclosure statement | The document setting out how an adviser works, who they work with, and how they get paid. Ours is on the site. |
| Conflict of interest | Anything that could pull an adviser's recommendation away from what suits you. It should be written down and managed, not hidden. |
Still got a word bugging you?
Send it through and we will explain it properly. No question is too basic, and we would much rather you asked.
This guide is general information, not personalised financial advice. Outrigger Financial Service Limited, FSP1009635.