4. Borrowers and Lenders: Section H - I

Question 1

Who is able to raise capital for business purposes using a residential mortgage?

Answer 1

Unincorporated businesses - generally sole traders and partnerships

Question 2

What is a semi-commercial mortgage? Also, give some examples

Answer 2

A property which will be used for residential accommodation and also for business purposes. IE. Public houses, B&B’s, workshops & studios. These are generally seen as high risk so lenders may apply more restrictive lending criteria

Question 3

What are commercial mortgages?

Answer 3

Loans secured on land that will not be used for residential purposes. These fall outside of the MCOB regulations.

Question 4

When may special criteria apply to a commercial mortgage?

Answer 4

If the applicant is a limited company.

Question 5

How is the maximum borrowing limit mostly determined when a commercial loan is applied for by a private individual or unincorporated business?

Answer 5

Loans to private individuals and unincorporated businesses are treated in a similar manner to residential mortgages, in which the maximum borrowing limit is mostly determined by the applicants perceived ability to repay.

Question 6

What are two distinctive features of building societies?

Answer 6

They must raise at least 50% of their funding from retail sources (mainly personal savings accounts)

At least 75% of their commercial assets must be mortgages secured on land for residential use

Question 7

What area might a specialised lender focus on?

Answer 7

Buy to let mortages/Semi commercial mortgages

Question 8

There are 9 types of lender in the mortgage sector, what are they?

Answer 8

Banks
Building societies
Insurance companies
Local authorities
Specialised lenders
Employee schemes
Correspondent lenders
Mortgage intermediaries (brokers)
Mortgage clubs/networks