Cemap 2 Flashcards
What is Semi Corporate lending? (commercial lending)
Lending towards a business where there is a residential ELEMENT E.G a corner shop with a flat above
What is corporate lending?
Lending towards a limited company or body with a separate legal identity
What is the meaning of a ‘Close Company’ ?
A close company is a limited company with five or fewer ‘participators’
What is the meaning of a ‘Guarantor’?
A person/entity that assumes the financial obligation of another party if the original party is unable to fulfill their obligation.
What is the compulsory cost to register a power of?
£82
When can the Health and Welfare LPA be used?
After the person loses capacity, not before.
What happens if you lose mental capacity without filling in the power of attorney forms?
Loved ones will need to apply through court to become ‘deputy’ - long and expensive process
When you make a Power of Attorney in England and Wales, what decides if you’re capable of making that choice?
A ‘certificate provider’
What is a ‘Surety’ ?
A surety is a guarantor who puts up something of value as collateral.
What are Registered Social Landlords?
Non profit making organisations that provide housing for rental or purchase
What is classed as a minor?
Persons under 18 years of age
What is a Debt Relief Order (DRO) ?
DROs allow people in debt to receive a year’s grace period before the loans are wiped out.
Who can arrange DROs?
The insolvency service or Approved Advisers
What is the meaning of Buy To Let?
A Buy to Let mortgage is for people looking to buy a property to rent out, rather than live in it
Name 2 forms of Unfair Practices
Mortgage cold call selling.
Excessive fees are not permitted
Key Facts Illustrations must illustrate fees
All mortgage arrangement fees must be included in APR
What is a mortgage by legal charge?
Most common type of mortgage.
Purchaser owns the property but lender has a right over the land until the loan is FULLY repaid.
What is a mortgage by demise?
The Property is owned by the lender when the loan is taken out. And is transferred from lender to borrower once it is fully repaid.
What is joint tenancy ownership?
Two or more people own an asset, on death the whole asset belongs to the survivor
What is tenancy in common?
An asset is held on a split basis.
On death of one party, their share of an asset passes to their estate.
What is Joint Borrowers Ownership?
No limit to the number of signatories on a mortgage. Most lenders allow up to 4
What is the meaning of the term ‘flying freehold’
When someone’s freehold property hangs over someone else’s land
What is freehold?
A type of land tenure however it is the nearest you can get to absolute ownership.
Freeholder owns the land, buy may be restrictions.
What is leasehold?
Own the property for a set period but not the land
Freeholders rent out the land for fixed period -> leaseholders own the property on the land for the fixed period.
What is forfeiture
The landlord’s right to terminate the lease and take back possession of the property if the tenant breaches the terms of the lease agreement
What is commonhold?
People individually have their own unit in a shared building, like an apartment complex. Each owner manages the common and external parts of the property together.
- No head landlord/freeholder
What is the leaseholders statutory right?
Leaseholders have the right to buy the freehold of their property and extend the lease up to 90 years.
What is the meaning of sub letting?
When an existing tenant lets all or part of their home to someone else who is known as the subtenant
What are tenements?
Houses built on top of eachother. Were initially built to house the masses (those that flocked to cities)
What are ‘title deeds’ ?
Title deeds are a series of documents which prove the ownership of a property and the history of its ownership
What is the meaning of positive covenants?
States what an owner must do
(E.G maintain a certain boundary, usually shown in the ‘title deeds’)
What is the meaning of Restrictive covenants?
States what an owner must NOT do
(E.G Run a business from the premises)
What is the meaning of Easements?
The right to use another persons land for a specific purpose.
What is the Proprietorship register?
A key section of the Land Registry title deeds, which lists the names and addresses of the current owners of the property.
What is ‘Good Leasehold’ ownership in consideration of the Proprietorship register?
Title to the freehold is unknown, although everything else is in order.
What is ‘Possessory’ ownership in consideration of the Proprietorship register?
if the deeds are lost - can be converted to absolute title after 12 years.
What is ‘Qualified’ ownership in consideration of the Proprietorship register?
Some conditions/restrictions are attached to the title
What is land registration?
The process by which the state guarantees the validity of a title in a registry.
What is the meaning of conveyancing?
Conveyancing is the legal process of transferring the ownership of property or land from one person or entity to another
What is a ‘squatter’?
An individual/group who occupy and use land without legal ownership from the rightful owner.
What happens if land is not properly managed according to the Agricultural Holding Act 1948?
Penalties can be enforced.
What is the meaning of matrimonial interests?
Matrimonial interests refer to the legal and financial rights and obligations that arise from marital relationship between spouses
What is the meaning of Equitable interests?
Equitable interests relate to the ‘fair and just’ covenant of those that don’t have LEGAL ownership but have a direct interest in property.
(E.G Husband & Wife purchasing a house TOGETHER, Husband is the LEGAL owner however wife has an EQUITABLE INTEREST because she contributed to the purchase + maintenance etc.)
How is equitable interests decided?
Through mutual agreement or court.
What is an example of matrimonial interests?
- Financial support after a divorce (married couples have the obligation to support each other financially during marriage and these obligations may continue after separation)
- Child Custody
- Inheritance Rights (the right of a surviving spouse to inherit a portion of the deceased spouse’s estate)
What is a ‘consent to mortgage’
A legal document signed by a spouse to grant permission to another spouse to mortgage jointly-owned property.
What is chancel repair liability?
This is a legal obligation that places the responsibility on certain property owners to contribute to the repair costs of the chancel.
What is a chancel?
The space around the altar in a church (building, courtyard etc)
What is the PCC?
Parochial Church Council - A governing body responsible for the financial affairs of the parish and maintenance of the church area surrounding the altar.
How would a person know that they are liable for Chancel Repair?
It would be mentioned in the property title deeds if applicable
- Isn’t universal, only affects certain parishes’
- You don’t have to live next door to a church to be liable either, could be liable if a part of the ‘community’
What is the additional SDLT rate that will become liable if an additional residential property is purchased for £40,000 or more?
Currently, An additional 3% surcharge on top of standard rates.
If i am a first time buyer purchasing a property for £550,000, what % of SDLT will I have to pay?
NOTHING up to £250,000, A 5% charge on the rest of the excess (£300,000)
What rate of SDLT will I have to pay if I purchase a third property valued at £1,000,000?
13%
(10% £925,001-£1,500,000)
(3% Surcharge added for purchasing an additional property above £40,000)
What rate of SDLT will I have to pay if I purchase a 2nd property valued at £170,000?
3%
(Purchasing a second home, so first £40,000 is exempt and the rest (£130,000) will be at 3%)
What rate of SDLT will I have to pay if I purchase my first property for £2,000,000?
12%
When a solicitor asks a seller for a ‘information pack’ what are the other two elements of this?
- The Property Information Form
- …
- Title Deeds
- …
- The Property information form
- The Fixtures, fittings & contents form
- Title Deeds
- Contract
What is included in the ‘Property information form’?
Its a standard questionnaire, gives details of boundaries + other property information
What is included in the ‘Fixtures, fittings + contents form’?
Tells you what IS/ISNT included in the sale of the house.
How do estate agents get paid?
On behalf of the vendor, on a commission basis, Usually 1.5%-3%
What is an advantage of buying a property at auction?
- If successful, the vendor cannot withdrawal
- Properties at auction are typically offered at a competitive reserve price (minimum)
If you are a successful bidder at an auction, what do you have to pay?
a 10% deposit will be required on the day.
What does the buyer need from the seller once an offer has been accepted?
The sellers’ information pack
What is the meaning of an ‘undertaking’
An undertaking refers to a commitment/promise to complete a specific job
E.G Defective plumbing - This might involve a contractor agreeing to repair faulty plumbing components
What is the meaning of a ‘Retention’
A retention refers to an individual holding back payment until a job is completed by a contractor as a form of security or guarantee
What is the purpose of a parapet/verge
Designed to prevent water from seeping into the property
What is a wet rot?
the effect of water coming into the property and damaging wood
What is a dry rot?
the result of fungus growth in the wood.
How would you fix a wet rot?
wood would have to be stripped and replaced and the cause of the water sepage fixed as soon as possible.
How would you fix a dry rot?
specialist report and action to get rid as can cover entire property if left untreated and also damage the owners health.
What is subsidence?
When the ground beneath a property sinks, pulling the property’s foundations down with it, creating cracks
How do you fix subsidence?
Underpinning is needed, which fixes the foundations, which is a massive job.
What is heave?
When the ground beneath a property rises/expands causing damage such as cracks.
Can also be caused by tree roots.
How do you fix heave?
Underpinning is needed, which fixes the foundations, which is a massive job.
What is Stamp Duty Land Tax or SDLT??
A lump sum tax that anyone buying a property/land costing more than a set amount has to pay
What is the inital tax exemption when purchasing your primary residence?
First £250,000 tax exempt
What are the margins for SDLT if the rate I’m required to pay is 5%?
£250,001-£925,000
What are the margins for SDLT if the rate I’m required to pay is 10%?
£925,001-£1,500,000
What is the rate of stamp duty when purchasing shares?
½% unless stamp duty is below £5
What is the rate of stamp duty on bearer instruments?
1½%
What are Subprime Lenders? (specialist lenders)
They focus on the subprime borrowers (those with poorer credit scores, making them higher risk)
Who is now responsible for regulating consumer credit?
The Financial Conduct Authority (FCA)
Who was responsible for the license and regulation of consumer credit under the consumer credit act 1974?
The Office Of Fair Trading (OFT)
What is an Annual Perentage Rate?
The overall cost of borrowing money as an annual rate.
(includes interest rate as well as additional fees or costs)
(The true cost of borrowing)
Where MUST an Annual Percentage Rate be shown?
In credit agreements
In relation to client agreements, what MUST clients be aware of?
The nature of the contract
Their Rights and Obligations
What does the Consumer Rights Act 2015 improve?
Enhances rights to consumers with faulty goods and services.
What does the Consumer Rights Act 2015 cover?
- What to do when goods are faulty.
- How services should be fit for purpose.
3.Unfair terms in contracts
What was the big change in the Consumer Insurance Act 2012?
- Removes the duty on consumers to volunteer material facts
- Instead puts onus on the insurer to ask questions they deem necessary in a ‘clear and specific’ manner
- Consumers must answer fully accurately and ‘take reasonable care’
What is an agent?
A person who acts on behalf of someone else.
What is the person who an agent is representing known as?
The Principle.
What is ‘Apparent Authority’?
This occurs if an agent acts outside of their stated authority, but it is clear that the principle approves of what the agent has done.
What is ratification?
Ratification is the formal confirmation or approval of a decision, agreement, or treaty by an individual or an organization
What is ratification in consideration to a principle?
This allows the principle to agree the action of an agent after the event has occured.
What makes a valid contract? (contract law)
There MUST be an Offer, Acceptance & Consideration.
What is the ‘Consideration’ in terms of house purchase? (contract law)
The consideration would be the deposit.
In consideration to contract law, the terms of the contract must be?
Certain, Complete, and free from Doubt.
What is an injunction?
An injunction is a court order compelling the other party to do/not to do something
What is the meaning of ‘caveat emptor’?
Latin Translation ‘Let the buyer beware’ - A principle in contract law that suggests that customers should do their due diligence, to ensure that they assess the quality, condition, and suitability of a product before making a purchase.
- Suggests that buyers should be aware of the risks associated with their purchases. Implies that sellers are not obligated to disclose all information about a product/service unless there is active misrepresentation or fraud involved.
What is the meaning of ‘utmost good faith’ & what is it used for?
Principle suggests that both the insurer and insured act honestly and fairly.
Used for life insurance contracts,
both parties are expected to disclose all material facts which are relevant.
What is required when a building is built, marketed for sale, or rented?
An Energy Performance Certificate.
What is included in an Energy Performance Certificate?
A report which contains information on the properties energy uses and CO₂ Emissions.
- Also has recommendations on how to reduce energy use + CO₂ Emissions.
In consideration to EPCs, what happens if a building has separate units?
Each unit will require its own EPC.
How does an EPC rate a property?
From
(A) Efficient
To
G (Very Inefficient)
what is ‘MEES’ ?
The Domestic Minimum Energy Efficiency Standard (MEES)
What happens if an individual tries to rent out a property with an EPC of F or G?
It is illegal, they are not allowed too.
What is the current price cap for EPC improvements?
£3,500
When does it become illegal to let/continue to let properties covered by MEES regulations?
If they have an EPC rating below E. (unless there is a valid exemption)
What is the SA302??
Essentially a summary of your income for a specific tax year, along with any tax you owe or have already paid.
- A document provided by HM Revenue & Customs (HMRC)
What is MMR?
Mortgage Market Review
A set of regulations set by the FCA, to improve the sustainability of the mortgage market and ensure that lenders are lending responsibly.
Who is responsible for assessing the affordability of mortgages?
Lenders are WHOLLY responsible
Why would a lender use the Electoral Roll when performing a credit assessment?
To establish whether the applicant is still living at the address given on the application form
Who qualifies as a ‘High Net Worth’ customer?
Those with:
minimum annual net income of £300,000 or
minimum net assets of £3 million.
What is a defined benefit?
The same as ‘Final Salary Scheme’
A pension product that invests a fraction of your final salary for every year of service up to a total of 40 years.
What is an ‘interest rate stress test’?
As part of a lenders affordability process, it is a review that determines whether a mortgage will still be affordable for the borrower if interest rates rise in the next 5 years.
What type of mortgage is the ‘interest rate stress test’ applied too?
All variable rate mortgages and fixed rate mortgages below 5 years
What is a ‘reversion rate’ ?
The interest rate that your mortgage ‘reverts’ too after your fixed rate period comes to an end
What are the latest FPC recommendations according to stress tests?
They recommend that an additional stress test of 3% is to be used
Is stress testing mandatory?
No, but many lenders retain the policy
What is a Decision in Principle (DIP)?
Confirmation from your mortgage lender of how much they’re willing to lend you for your mortgage.
How does a ‘Mortgage Capacity Report’ Differ from a Decision in Principle?
- It costs money + will vary depending on factors such as the complexity of the individuals financial position
- Much more detailed - often showing future mortgage capacity.
- Created by highly qualified individuals.
They are ‘DIPs on steriods’
What is a mortgage capacity report?
Similar to DIPs - It is a financial document prepared by a financial institution that assesses an individuals ability to obtain a mortgage based on their income, expenses, creditworthyness etc.
What is an initial disclosure?
A document given out on the first client meeting which outlines essential information about the mortgage product the individual is considering. E.G its key features, fees, interest rates etc.
What is a European Standard Information Sheet (ESIS)?
Similar to an initial disclosure however specifically tailored to mortgage loans within the EU
- Provides the borrower with key info about the product they are considering.
What are County Court judgements?
When a debtor cannot pay his creditor, a case can be brought against him in court.
The court can make a judgment against the debtor which will remain in place until it is repaid.
What is occupancy fraud?
Occupancy Fraud occurs when a mortgage applicant declares owner occupation but will rent the property instead.
What is the meaning of the term ‘Shotgunning’?
Where multiple loans for the same home are obtained simultaneously for an amount in excess of the true value of the property
List potential selling costs that could be incurred during a property transaction
- Solicitors conveyance fee - for arranging the sale + drawing up the contract
- Estate agents fee - Typically 1-3%
3.Energy Performance Certificates - Mortgage redemption penalty if you were caught within the redemption period.
What are ‘Disbursements’?
Disbursements refer to the costs that a solicitor/conveyancer may need to pay to third parties on behalf of their client during a property transaction.
List potential Buying costs that could be incurred during a property transaction
- Solicitors conveyance fee for arranging the purchase of the property
- Stamp Duty
- Disbursements
- Survey Costs
What are Local Authority/Local Land Charges?
Restrictions/Obligations affecting a property held by the local authority
Could be:
Planning Permissions
Tree Preservation Orders (TPOs)
Conservation Area Restrictions (Protecting historical/architectural significance)
What is the meaning of ‘Security for mortgage’?
Refers to the collateral provided by the borrower to the lender as a guarantee for the repayment of the loan
What is a condition report?
Helps buyers on a budget receive a decent report on the condition of a property.
What is a building survey?
A thorough inspection of a property carried out by a professional surveyor
-paid for by borrower
-expensive (but worthwhile)
Why might a borrower need a basic valuation for a property?
To assess how adequate a property is to be used as collateral/security for a mortgage.
What is the meaning of the term ‘Lower Advance’?
The valuer of a property considers it to be of lower value than the price
What is the meaning of ‘decline’ in consideration to Property Surveys
The property is not suitable security for the mortgage loan being asked for
What is the meaning of ‘conservation areas’?
Designated locations that’re protected by the government because of their historical significance
How will living in a ‘conservation area’ affect a property owner?
Owners in these areas may need permission to carry out alterations to their property
What is the UK Governments ‘Mortgage Guarantee Scheme’
- Helps first time buyers with a smaller deposit get a mortgage.
- Government tells lenders that if you default on your mortgage loan and they lose money, the government will cover some of the losses
- This inturn makes lenders more willing to give a mortgage with a small deposit of 5% rather than 20%.
What is the meaning of the word ‘Indemnity’?
Essentially a Guarantor; A promise made by one party to compensate another party for specific losses or damages.
What is an endowment policy?
A life insurance policy that provides a death benefit as well as a savings/investment component
What is an ‘offer of advance’?
A formal document from a lender to a borrower that confirms they are happy to issue funds before all the paperwork is finalised.
-used by lenders to attract consumers, allowing borrowers to meet urgent financial matters.
What are ‘mortgage deeds’?
Legal documents that establish a mortgage agreement between lender and borrower. Outlines the terms and conditions of the mortgage.
What is the ‘New State Pension’?
How long is it paid for?
Is it taxable?
Provides a weekly retirement pension income to people over 66
- Paid until death
- Taxable
What is the ‘State Pensions Credit’?
How long is it paid for?
Is it taxable?
Anyone retired & on a low income
- Paid until death
- Not Taxable
What is ‘Statutory Maternity Pay?
How long is it paid for?
Is it taxable?
Weekly income for pregnant women who have been with the same employer at least 6 months.
- Paid for 39 weeks, 1st 6 weeks are 90% pay
- Taxable
What is ‘maternity allowance’?
How long is it paid for?
Is it taxable?
Available to self employed or mothers just recently changed jobs
- Paid for 39 weeks
- Not Taxable
What is ‘Paternity Pay’?
How long is it paid for?
Is it taxable?
Available to fathers or partners to help take time off work to care for the baby
- Paid for 2 weeks
- Taxable
What is a ‘Child Benefit’?
How long is it paid for?
Is it taxable?
Paid weekly to adult responsible for child from birth to maximum age.
- Paid until child reaches 16 years of age
- Not Taxable
Does ‘Child Benefit’ need to be repaid?
Only if one partner earns more than £50,000
What is ‘Statutory Sick Pay’ (SSP) ?
How long is it paid for?
Is it taxable?
The minimum statutory wage employers will pay on sickness to employees.
- Paid from the 4th day up to 28 weeks
- Taxable
What is ‘Carers Allowance’?
How long is it paid for?
Is it taxable?
Given to carers of the seriously ill or disabled claiming PIP
- Paid indefinitely
- Taxable
What is ‘Personal Independence Payment’ (PIP)
How long is it paid for?
Is it taxable?
A non means tested benefit for people aged 16-64 with a disability or long term ill health.
- Paid indefinitely
- Not Taxable
What is Redundency?
Situation where an employer terminates and employees job because it is no longer needed.
How would an employee be eligible for a Redundancy Payment?
How long is it paid for?
Is it taxable?
If employee is made redundant after being with employer for more than 2 years.
- One off lump sum
- Not Taxable if less than £30,000
What is ‘Job Seekers Allowance’ ?
How long is it paid for?
Is it taxable?
Paid to those unemployed or working less than 16 hours per week
- Paid for 6 months
- Taxable
What is ‘Bereavement Support Payment’ ?
How long is it paid for?
Is it taxable?
Paid to widows or surviving civil partners
- An initial lump sum followed by 18 monthly instalments
- Only the instalments are taxable
What is SMI?
Support for Mortgage Interest
A financial assistance program by the government to help homeowners struggling to pay mortgage interest
What is the current standard interest rate used to calculate SMI?
2.09%
What is the current waiting period for SMI?
13 weeks.
What is a Term Assurance Policy?
A form of life insurance that provides coverage for a specified ‘term’
- Designed to provide financial protection to beneficiaries in the event of policyholders death.
What is a ‘Death Benefit’?
The amount that will be paid to beneficiaries in the event of death to the policyholder during the term.
What is a disadvantage to level term assurance?
The value of sum assured may be eroded by inflation.
What are decreasing term assurance policies most often used for?
Often used for mortgage protection.
(as mortgage outstanding balance decreases, so does amount of insurance needed)
What is convertible term assurance?
A life insurance policy with the opportunity to convert it to a permanent policy at a later date.
What is Personal Pension Term Assurance?
Virtually the same as level term assurance however you can get up to 45% tax relief on premiums.
What is Relevant Life Assurance?
A ‘death in service’ term assurance plan which allows small businesses to offer life insurance benefits to employees, tax efficiently.
What is the meaning of ‘Probate’?
The process in which a deceased persons estate Is settled and distributed to beneficiaries under the the supervision of a court.
whereby a will is ‘proven’ by a court
What is a ‘Trust’?
An arrangement in which the settlor grants a trustee authority to hold and manage assets on behalf of the beneficiaries following death of the settlor/life assured
What is the role of a trustee in a trust?
Chosen & trusted by the settlor
To hold and manage assets on behalf of beneficiaries following death of settlor.
(pass on sum assured to the right people)
If a trustee is granted ‘complete discretion’, what does this mean?
This refers to a situation where a trustee is given full authority to make decisions regarding the distribution of trust assets without being bound by specific instructions/limitations set forth in the trust document.
What is a ‘Discretionary Trust’?
A trust in which trustees have complete discretion as to who gets the money, they are not held back by specific instruction by the life assured.
- Also means there is no immediate IHT charge, because no decision has yet been made.
What is a ‘Lifetime Transfer’
This refers to the transfer of assets/property during an individual’s lifetime to another person.
What is Mortgage Payment Protection Insurance (MPPI) ?
A type of general insurance designed to help homeowners cover their mortgage payments if they become unable to work specifically due too illness, injury or unemployment.
How long do Mortgage Payment Protection Insurance benefits last for?
A MAXIMUM of 2 years.
What is Mortgage Payment Protection also known as?
ASU insurance (Accident, Sickness, And Unemployment)
What are the 3 different types of insurance?
Life insurance - Provides financial support to beneficiaries in the event of the policyholder’s death
Health Insurance - Covers medical expenses related to illnesses, injuries, and health conditions.
General Insurance - Covers non-life-related risks and liabilities.
What is a ‘Deferred Period’?
The initial waiting time from when a claim is made until the benefit is paid.
What is a proportionate benefit?
Typically a benefit of IPI, this applies if an individual is able to work but not to the capacity that they did before,
their insurance payout is relative to how much the disability has interfered with their work.
E.G If you’re able to work at 50% of the capacity that you did before, proportionate benefit will cover the other 50% (the amount that the disability has been deemed to be affecting)
Insurance Companies have different definitions of incapacity, depending on the individuals occupation after illness/injury. These are?
Own occupation, Suited occupation, Any occupation
What is own occupation?
Individual is unable to perform substantial duties of own occupation (the job they were working before illness/injury) regardless of their ability to work in another occupation.
What is suited occupation?
Individual is TOTALLY unable to work a job that is suitable to them based on education, training or experience.
(The person does not have capacity to perform previous job OR any job relating to this)
(E.G The individual isnt fit to be a doctor anymore, but also isnt fit to TEACH being a doctor)
What is the meaning of ‘Any occupation’?
Individual is TOTALLY unable to work any occupation whatsoever.
(The person does no longer have capacity to work their previous job, a job related to it, and any job at all)
In terms of disibility insurance, how is the eligibility for benefits tested if the person is not in a paid occupation?
By failing a number of activities of daily working/living (ADW/ADL)
or on a functional ability test (FAT)
For ‘own occupation’ claims, typically, how long do benefits last for?
2 years, then the definition will change from own occupation to suitable occupation which may affect eligibility for continued benefits.
List some common exclusions for Income Protection Insurance:
- Self Inflicted Injuries
- Alcohol & Drugs other than direction of Medical Practitioner
- Pregnancy & Childbirth + complications arising from them
- Participation in criminal activities
- Disabilities arising from events such as war, invasion, act of foreign enemy, riot, military
If an individual has IPI, and changes occupation, what do they do?
They need to inform the Life office, and they will decide whether to continue the insurance.
If the new job is riskier, Premiums are likely to increase.
What risks do IPI underwriters look for?
Morbidity risks, not mortality. Because being too ill to work is far more likely than the chances of dying.
(Medical History, Age, Occupational Risks, Mental Health)
What is ‘Morbidity’?
The relative incidence of a particular disease.
What are some factors that could affect IPI Premiums?
Occupation.
Age.
Deferred Period.
Length of term.
ASU VS IPI
Who has the better COVER?
ASU Covers just mortgage payments + associated insurances
IPI Covers the salary
ASU VS IPI
Who has the better timescale for COVER?
ASU covers for up to 2 years
IPI can cover until retirement
ASU VS IPI
Who has the better deferred period?
ASU has a standard period of 1 month.
IPI has options, customer can choose up to a year
What is Critical Illness Cover?
Designed to pay out a lump sum on diagnosis of a specified illness
What is a ‘waiver of premium’?
An insurance feature/rider that ensures the policyholder that if they become unable to make their premium payments due to critical illness/disability, the insurance company will ‘waive’ the payments for a certain period or duration of the disability.
What is Combined Life Assurance + Critical Illness Cover?
Essentially an ‘accelerated death payment’
Pays out on diagnosis of a specified illness within the term OR on death during the term
How often are reviewable CICs reviewed?
Every 5-10 years
If premiums happen to go up within a Reviewable CIC policy, why could this be the case?
This would most likely be the case due to general advances in medical science
& not due to the policyholders state of health
What is the basis of Landlord Insurance?
Similar to home insurance but specifically designed for properties that are being rented
What is the basis of buildings insurance?
Covers any damage to the structure of a property + cost of rebuilding it
What is the basis of contents insurance?
Covers the cost to repair/replace fixtures & fittings such as carpets, furniture + electrical items
What is the basis of liability insurance?
Covers you if your tenant or a visitor suffers an injury within your property.
What is the basis of Rent Guarantee Insurance?
(Tenant default Insurance)
Protects you if your tenant falls into arrears.
What is the basis of Home Emergency Cover?
Round the clock cover against loss of essential services within your property.
(Plumbing, heating, roofing, problems with doors,windows,drains,pipes)
What is the basis of Personal Accident & Sickness Insurance?
A lump sum paid on death, loss of eyes, loss of limbs or permanent inability to work again.
What is the basis of Long Term Care Insurance?
Provides funds to meet the cost of care
How are benefits for Long Term Care Insurance determined??
Determined by the need of the policyholder and how many ADLs (Activities of daily living) they cannot do.
(Washing, feeding, dressing, using toilet)
What cancellation notice timeframe is required for general insurance products?
14 days
What cancellation timeframe is required for protection plans?
30 days
How do capital+interest mortgages work?
(Repayment mortgages)
Each monthly payment consists of part interest & part capital outstanding.
Early years = mostly interest
Over the years, proportion of capital increases
What is the meaning of Interest Rests?
This is the rate at which interest is calculated and added to your loan balance.
Can be calculated annually, Monthly or Daily
Why do daily rests benefit early payers?
Paying early reduces your loan balance sooner, leading to less interest being calculated and paid. Saving you money over the life of the loan.
What is the key difference between APR and APRC?
Annual Percentage Rate is used for a wide range of financial products whereas Annual Percentage Rate of Charge is used specifically for mortgages and additional costs that come with it.
What is a With Profit Endowment?
A policy that combines life insurance with an investment component
Reversionary Bonus - A share in companies profits
Terminal bonus - Added at maturity or death
What is a reversionary bonus?
A bonus that can be declared under a With Profits Endowment policy.
Essentially, its a share in the companies profits just like a dividend
Added annually, but once declared, cant be removed.
What is a Terminal Bonus?
A bonus within a With Profits Endowment Policy that is paid out on death or on maturity of the policy.
What is a With Profit Endowment?
A life insurance product that combines savings & insurance.
Savings Component: Premiums pooled into a with profits fund by the insurance company - savings grow through the addition of bonuses (Reversionary + Terminal) (A share in companies profits)
Pays a higher fixed premium
What is a Low Cost With Profit Endowment?
A life insurance product that combines savings & insurance at a lower premium cost.
Premiums are put into a With Profit fund
Typically used for mortgage purposes, Policy aims to align investment performance with target mortgage payoff amount by the end of the term.
(Potentially may not reach goal if investment performance is poor)
(Heavily reliant on bonuses in reaching target)
(Reversionary + Terminal)
What is a Unitised With Profit Endowment?
A Life Insurance Product that combines elements of both unit linked + with profit policies.
Portion of premiums are put into a with profits fund by insurance company
Remaining portion are used to purchase units in the with profits fund.
Bonuses are added by allocating additional units to the policy.
What is a Unit Linked Endowment?
A life insurance policy which combines investment (stock market) & insurance.
Part of premiums paid are used to purchase units in a chosen fund.
Units are cashed in at an appropriate bid price to payout the surrender, maturity or death claim.
What is the Maximum Annual Allowance for Isas?
£20,000 per year
How old must you be to open an Equity ISA?
Minimum Age: 18
What is an Equity ISA?
A savings account that allows you to invest in equity based investments.
(Such as shares, unit trusts, OEICs, Investment trusts, ETC)
What ISAs do you have to pay tax on ?
None, all ISAs offer different tax advantages
How old must you be to open a Cash ISA?
Minimum Age: 18
If an individual dies with an ISA, how can a survivor/partner benefit from this?
On death, your ISA can benefit from ‘Additional Permitted Subscriptions’
- Allows survivor/partner to pump money into your ISA for up to 3 years.
What is a Junior ISA?
A tax free savings account available to kids under 18
What is the Maximum Annual Allowance for Junior ISAs?
£9,000 a year (ANYONE can contribute)
What is a Lifetime ISA?
A tax free savings account in which the government gives a £1 for every £4 put aside
What is the age requirement to open a Lifetime ISA?
Must fit into the age bracket of 18-40
Are you able to withdraw from a Lifetime ISA?
No, you can only access the funds once you turn 60 or if they’re used to purchase a house
What is the maximum amount that the government will contribute towards a Lifetime ISA?
£32,000
What is the consequence of an individual accessing their Lifetime ISA funds early?
They are liable to a 5% fee
To whom are Stakeholder pensions available too?
Available to ANY UK resident under the age of 75
What is the maximum contribution for Stakeholder pensions?
The maximum annual contribution is £60,000 or 100% of your annual income, WHICHEVER IS LOWEST.
What is possible if you have an unused stakeholder pension allowance?
Can be carried forward for up to 3 years.
What is the minimum contribution for a stakeholder pension?
£20, but can contribute as often as you like
When can you withdraw from a stakeholder pension?
Can start taking benefits from age 55
What tax do you pay on a stakeholder pension?
(accumulation + withdrawal)
There is no tax on the accumulation/growth of the pension.
25% of your pension can be taken out tax free (and can be taken out as a lump sum)
The remaining 75% is taxed as income.
What is the maximum tax free amount for stakeholder pensions?
£268,275
What is the annual charge for stakeholder pensions?
The first 10 years - 1.5%
Thereafter - 1%
What is the maximum contribution for a stakeholder pension if youre unable to provide evidence of earnings?
£3,600
What is the Lifetime Allowance for pensions savings?
£1,073,100
What happens if you die before age 75 without taking your pension?
The fund is passed to your beneficiaries tax free
What are the options at disposal after the age of 55?
- Tax free lump sum
- Uncrystallised funds pension lump sum
- Flexi Access Drawdown
- Money Purchase Annual Allowance
What is an uncrystallised funds pension lump sum?
Taking the entire pot out as a lump sum
-25% tax free
- The rest at marginal rate of tax
(would very easily push a nontaxpayer into higher rate/additional rate of tax)
What is a ‘HLC’ ?
A higher lending charge…
What’s a home reversion plan?
This affects homeowners that need to raise some funds
In exchange for a lump sum, investment firm takes over a portion of the homeowners house (or full)
Homeowner becomes leaseholder (tenant) that doesn’t pay rent
Firm becomes legal owner of property after they die + owns capital value in the house
What is a cash back incentive?
A sum of money paid by the lender to borrower on completion of a mortgage based as a % of the loan
What is the meaning of a ‘clawback’ and why do lenders use it?
If a borrower redeems a cash back loan early, some or all of the cash back must be returned
- lenders use this to encourage the borrower to maintain the loan over a substantial period of time
What is the meaning of a ‘clawback’ and why do lenders use it?
If a borrower redeems a cash back loan early, some or all of the cash back must be returned
- lenders use this to encourage the borrower to maintain the loan over a substantial period
What is a right to buy mortgage?
Tenants who specifically live in a council house for atleast 3 years earn the ‘right to buy’ the property at a discount
- the longer it has been lived in, the more significant the discount can become
What is the maximum discount for right to buy properties? (Houses + flats)
Maximum discount for houses - 35%
Maximum discount for flats - 50%
How does a self build mortgage work?
Allows people to find land and build a home to suit their dreams
- loan payments are given in stages as the build develops
E.G -
Stage 1 - land + footings
Stage 2 - outer frame + roofing
Stage 3 - plumbing, utilities etc
What is the maximum LTV (loan to value) for self build mortgages?
75%
What is a loan to value?
How much you’re allowed to borrow against the value of the property
E.G Property value = £200,000
LTV = 75%
You can borrow up to £150,000
What are some key features that make flexible mortgages ‘flexible’?
Overpayments + underpayments
- can pay more than regular monthly payments without penalty
- can also underpay if they have previously overpaid + can take ‘payment holidays’
Interest is calculated daily
(Making overpayments very beneficial)
