Confirming Outgoings

Question 1

Interest Rate Stress Test

Answer 1

Borrower takes 3yrs fixed rate mortgage, current SVR is 4.5%

Reversion rate is 4.5% +3% expected rise = 7.5%

• Stress test only applies to the first 5 years so if the mortgage is 5yrs+ it doesn’t need to be done

Question 2

Debt Consolidation Mortgage - 2nd charge or advance

Answer 2

Consolidating debt with a loan against the mortgage
- These are vulnerable customers and lenders take extra care

Credit impaired customers

• CCJ’s
• Bankruptcy within 3 years
• IVA’s
• 3 months in arrears

Lenders consider if your debt is impeding mortgage payment
- lender can include debt as committed expenditure

Question 3

Credit Searches

Answer 3

• Confirm address via the electoral register

- Use credit reference agencies for credit report

Question 4

Credit Score

Answer 4

• Computerised system
• Lenders will have a cut off score for low/borderline borrowers
• Lender modelling is changed depending on the mortgage market.
• Borrowers should check their own credit score prior to application and make improvements if needed

Question 5

Guarantee Mortgages

Answer 5

Full Liability
- Liable for 100% of the mortgage if borrower defaults

Limited Liability

• Liable for the difference between the size of the loan the lender would usually offer and the purchase price.
• Liability is removed once the loan reduces to the amount the lender would usually offer.

Question 6

Guarantor

Answer 6

• Will be affordability assessed
• Must be under 65 & prove they can pay in the event of default
• Usually short term agreements

Unlimited Guarantees

• All encompassing
• Guarantor has no right over the property
• Guarantor has no right to be notified of missed payments