Exam Questions for Cemap 3 Flashcards
Case Study:
Andrew is 29 and a partner in an accountancy business earning £55,000 per annum. Andrew is selling his first property and has had an offer of £260,000 accepted on a property in the South East of England. He calculates that after paying moving expenses he will need an 85% mortgage. The sale of his existing property will complete at the same time as the purchase of his new home.
Andrew would like to combine the repayment of his new mortgage with his retirement planning needs by using his existing personal pension, started in 2014, as a repayment vehicle. As he dislikes the thought of debt, he hopes to pay off the mortgage as early as possible. Andrew’s sister, Helen, intends to occupy the spare bedroom in the house while she finishes her degree at the nearby university.
Although friends have said that Andrew does not really need life cover on the mortgage as he has no dependants, he would like to future proof his arrangements by setting up a suitable protection plan while he is young and premiums would be affordable.
His independent mortgage adviser, Anita, has recommended an interest-only, two-year base rate tracker mortgage at 1.8% above the Bank of England base rate with the Northchester Building Society. She will receive a procuration fee of £220 if the mortgage goes ahead.
Northchester Building Society requires mortgage payments to be no more than 80% of free disposable income, taking into account committed expenditure, basic essential expenditure and basic quality of living costs.
Andrew’s personal pension is projected to produce a total fund of £1m at the earliest date he could take benefits. He currently pays £300 per month net into his pension, with payments automatically increasing by 10% each year.
Questions:
1) If Andrew opts for the recommended mortgage, what rate will automatically apply to his mortgage after the end of the second year?
2) Assuming that the projection for Andrew’s preferred mortgage repayment vehicle is achieved and he uses the plan to repay the mortgage in the most tax-efficient way, what additional amount could he take from the plan without incurring a tax charge?
3) Assuming Andrew is a higher-rate taxpayer, how would he receive tax relief on his pension contributions?
4) What would be the main potential problem with Andrew’s proposed mortgage strategy?
5) If Andrew takes his adviser’s recommended mortgage product, the interest rate he will pay during the first two years will be influenced by decisions made by: WHO?
6) What is Northchester Building Society likely to require from Andrew’s sister if she goes ahead with her intention to occupy Andrew’s spare room while she finishes her studies?
7) Andrew calculated that he would need to pay some stamp duty land tax (SDLT) on his purchase. He is puzzled that his friend Chloe, aged 25, is buying a similarly priced house but will not have to pay SDLT
8) To comply with the MCOB rules on initial disclosure, what must Andrew’s adviser inform him about the building society procuration fee?
1) Northchester Building Society’s standard variable rate at that time
2) 29000
3) net of basic-rate tax and claim additional tax relief through self-assessment
4) The length of time before he would be able to repay the mortgage
5) The Bank of England Monetary Policy Committee
6) A signed consent to mortgage form
7) Chloe has not owned a property before.
8) The adviser must inform Andrew of the exact amount of the fee
Case Study:
Derek and Brenda, both aged 45, completed the purchase of their house in 2014 for £520,000.
They have received a letter from their mortgage lender, the Poynton Building Society, stating that their last monthly payment has been missed, which now means that they have missed two payments.
Their existing £240,000 mortgage is on an interest-only basis and Derek and Brenda are both investing in stocks and shares ISAs with different providers to fund the final repayment of the mortgage.
Over the years, Brenda has invested in an ISA, mainly in cash with the occasional investment in stocks and shares within the ISA. Derek, on the other hand, has invested solely in stocks and shares ISAs. Only Derek has contributed to his ISA in the current tax year, although he is £19,000 short of the maximum allowed. Brenda did not maximise her contributions for the previous tax year, only paying £2,500. Both took the opportunity to move their ISAs into flexible ISAs two years ago. They also have a level term assurance policy on a joint-life, first-death basis, which is assigned to the lender.
The main reason for the arrears is Derek’s redundancy, which happened six months ago when the firm he worked for went into liquidation. Before the redundancy, though, they had little money left at the end of each month. Unfortunately, Derek’s redundancy package was too small to be of much help.
Derek will be starting another job in two months’ time and, although he will start on a lower salary than he earned previously, the potential bonuses are higher and he is confident that their finances will soon be back on track. Brenda works as a part-time admin assistant for a local firm.
Derek and Brenda have always spent all of their income each month and, as a result of their high-spending lifestyle, they have virtually no savings other than their ISA funds. They have also built up credit card debts that they are struggling to repay. Derek and Brenda have now approached Davitts plc, their mortgage adviser, to discuss their arrears.
QUESTIONS:
1) Given Derek and Brenda’s current financial difficulties, they are considering a 20-year remortgage with a different lender to consolidate their arrears and credit card debts. What is the most likely outcome if they made such an application?
2) What would be most suitable in helping Derek and Brenda to manage their payment problem, should it continue?
3) Once Poynton Building Society became aware that Derek and Brenda’s account was in arrears, it was required to write to them within:
4) How long will Derek and Brenda’s lender allow them to clear their mortgage arrears
5) Why would the lender not consider using the assigned life policy to reduce the mortgage arrears?
6) What is the main reason that Derek’s stocks and shares ISAs are likely to produce higher values on final encashment than a similar investment portfolio of unit trusts?
7) Davitts’ initial advice to Derek and Brenda will be to WHAT?
1) The new lender would decline their application on an affordability basis.
2) Partial suspension of monthly payment
3) 15 business days
4) A reasonable time
5) The policy will have no cash value
6) ISAs are free from income and capital gains taxes
7) contact Poynton Building Society
CASE STUDY:
After looking at many properties, Nathan and Louise have found what Louise describes as their ‘dream home’, a 1980s semi-detached house in the North of England. Their offer of £220,000 was well below the asking price but has been accepted on the basis that they will be able to complete the purchase very quickly. Although they have a firm buyer for their existing property, and the purchase process has started, it has been subject to delays and their solicitor has advised that the sale of their property is likely to be completed four weeks after Nathan and Louise need to complete on their new purchase. Nathan and Louise are desperate to secure their new home and their solicitor has suggested that, as there is going to be a gap between the two completion dates, they could consider bridging finance with an agreed maximum term of six months.
Nathan and Louise have been told by Island Building Society that, in principle, the lender sees no problem providing them with the required mortgage, subject to full checks on their status and the property. They are now in discussion with the lender’s adviser to decide on the most suitable mortgage arrangements.
Nathan, aged 40, is employed as an operations manager in a local packing company. Louise is aged 39 and works part-time in a local shop. The couple have two children: Lorna, aged 20, who is a full-time student, and Ethan, aged 16. Nathan and Louise require a mortgage of £120,000 over 25 years. Although they regard their income as adequate, they want to protect their outgoings against potential rises in interest rates until Lorna completes her university course at the age of 23.
Nathan and Louise want to ensure that their mortgage is paid off by the time Nathan retires at age 65. They have no protection products in place and require appropriate life cover at the cheapest cost available. They are both entitled to three months’ sick pay, but Nathan is anxious to protect their financial position if he is made redundant or has an illness that lasts longer than three months.
A builder friend of Nathan’s pointed out that their proposed new house was in need of external decoration and suggested that lenders sometimes required an undertaking in this situation. Nathan also noticed some small cracks in the dining room wall, and in view of this Nathan and Louise wonder if it would be possible to combine the lender’s valuation with a report on the basic condition of the property, including major defects and recommendations as to any actions they would need to take to remedy any problems.
Island Building Society’s affordability criteria require mortgage payments to be no more than 80% of free disposable income. The maximum loan-to-value (LTV) ratio is 85%. As part of its initial affordability assessment, Island Building Society uses figures available from the Office for National Statistics rather than exact figures.
QUESTIONS:
1) If Nathan and Louise decide to arrange bridging finance, and the interest is rolled up, does the lender still need to consider affordability?
2) Which type of valuation or survey would best meet Nathan and Louise’s requirements?
3) How would the couple’s new purchase be treated for stamp duty land tax (SDLT) purposes?
4) To comply with the MCOB rules, when first meeting Nathan and Louise, the Island Building Society adviser must ensure that they are aware of:
5) The lowest cost product to provide the protection Nathan requires for his income would be WHAT?
6) Island Building Society’s method of initially assessing affordability means that Nathan and Louise will not need to provide detailed evidence of their:
7) f Nathan and Louise proceed with their mortgage, Island Building Society will need to keep details of any European Standardised Information Sheet (ESIS) it issued for a minimum period of:
1) No, If the bridging loan is on an interest roll-up basis no affordability assessment is required. If it is not on an interest roll up basis the bridging loan must be treated as a new loan and subject to an affordability assessment.
2) A RICS Home Survey Level 2 (survey and valuation) Report
3) be subject to a 3% SDLT surcharge, which can be reclaimed on sale of the original property within 36 months of the new purchase
4) how the adviser is remunerated
5) Would pay benefits for a maximum period of one or two years (this is referring to Mortgage payment protection insurance (MPPI).
6) basic essential expenditure.
7) 1 year (Firms must keep a record of the ESIS or KFI for a period of one year from the date of the customer’s application)
READ UP ON
15.9.2
10.5.1
17.2.1
25.3.2
Robert, 27, has worked on his own as a self-employed landscape gardener for the last five years. Following his recent engagement to Jenny, a full-time mature student, they are looking to move to a larger property. They currently live in rented accommodation and are now hoping to buy their first property together. Robert owns a quarter share in his family’s holiday apartment in Portugal, which was recently valued at the euro equivalent of £140,000.
They have found a suitable flat in the East of England, which was on sale for £140,000, but their initial offer of £132,000 has been accepted. They are funding the purchase with savings of £15,200 and a mortgage for the balance.
Robert and Jenny have recently held discussions with their mortgage adviser. Due to the expense of their forthcoming wedding and Robert’s business expansion plans, they have expressed a strong desire to keep costs low for the first two or three years while having certainty of payments.
During discussions about the method of repayment, Jenny indicated a preference for a repayment mortgage, whereas Robert likes the idea of an interest-only mortgage supported by an ISA.
Their adviser has recommended East Coast Bank as a suitable lender. The lender’s policy with self-employed applicants is to consider net profits for the previous three years. In terms of affordability, East Coast Bank requires mortgage payments to be no more than 85% of free disposable income, taking into account committed expenditure, basic essential expenditure and basic quality of living costs.
The adviser has recommended either an income protection insurance (IPI) policy with Acme Life or an accident, sickness and unemployment (ASU) policy with All-Cover plc to ensure that Robert can meet his financial commitments should he be unable to work.
A basic valuation has recently been carried out on the new flat and the valuer recommended a retention.
Questions:
1) What should Robert be aware of regarding his preferred repayment vehicle?
2) In order to assess borrowing capacity and affordability, Robert and Jenny’s mortgage application to East Coast Bank should be accompanied by proof of Robert’s earnings for mortgage purposes. Within a full set of accounts, which specific document will best provide the figures required by the bank?
3) What are the likely implications of the retention recommended by the valuer?
4) For what minimum period would the financial adviser’s firm need to keep records about Robert for anti-money-laundering purposes?
5) If they proceed with Robert’s preferred repayment vehicle, how would any dividends received be treated? Dividends above the dividend allowance would be taxable or Dividend would not be taxable at all?
6) How would the couple’s proposed purchase be treated for stamp duty land tax (SDLT) purposes?
7) What potential advantage would Robert obtain by choosing Acme’s protection policy instead of All-Cover plc’s protection policy?
8) What key potential advantage is obtained by opting for Robert’s preferred mortgage repayment method compared with Jenny’s? Much lower monthly payments at the outset or Possibility of paying off the mortgage early?
1) Separate life cover should be arranged
2) A profit and loss account. (10.5.1)
3) Robert and Jenny will need additional short-term funds to complete the purchase
4) Five years from the end of the firm’s relationship with Robert
5) Dividends would not be taxable
6) The purchase will be subject to SDLT at the standard rate as neither the first-time buyer exemption nor the SDLT surcharge would apply
7) potentially longer benefit payment period
8) Possibility of paying off the mortgage early (not monthly payment answer because payments are almost the same with both repayment and interest only at the start of the term since with repayment you only begin to pay off the capital as the term proceeds)
Case Study:
Hayley is a project manager, aged 34, and is employed by a well-known airline company where she has worked for 12 years. She earns a salary of £42,000 pa, plus an annual bonus that has grown to £5,000 this year. She is single and has no dependants.
She bought her first property, a new-build freehold semi-detached house in Central England for £160,000 using the Help to Buy Equity Loan scheme. The purchase completed in January 2023.
Hayley has a repayment mortgage from the Glade Building Society, a Help to Buy Equity Loan scheme participating lender, and put down £16,000 as a deposit. The interest rate is discounted by 1% for the first two years. The building society’s capped-rate product over the same period is currently capped at a rate 0.25% lower than the discounted rate. Both products carry an early repayment charge in the first two years.
The building society routinely carries out credit searches on prospective borrowers through a credit referencing agency. Hayley asked why this was necessary.
Hayley’s parents are elderly and, as an only child, she expects to inherit a substantial amount of money before the end of the term of her proposed mortgage. She is likely to use this money to reduce the outstanding balance at that time.
Glade Building Society required mortgage payments to be no more than 80% of free disposable income, taking into account committed expenditure, basic essential expenditure and basic quality of living costs.
Questions:
1) If Hayley decided to arrange a life assurance policy to ensure that her mortgage would be repaid in the event of her death, which type of policy would have been most appropriate? Level term assurance, Mortgage payment protection insurance, or Mortgage protection assurance?.
2) Hayley has stated that she would like to pay off some of the Help to Buy Equity Loan as soon as she can afford to. At that time, the minimum she could repay would be WHAT?
3) What was the position with stamp duty land tax (SDLT) on Hayley’s purchase, assuming the 2023/2024 tax year rules apply?
4) What is the position with Hayley’s Help to Buy Equity Loan? She will pay: WHAT?
1) Mortgage Protection Assurance
2) 10% of the market value of the property.
3) She’d be exempt
4) A charge of 1.75% of the equity loan, commencing from the start of year six and increasing by inflation each year thereafter.
Case study:
Hannah, aged 34, and her boyfriend Graham, aged 32, wish to buy a property jointly; it will be the first property purchase for both of them. They have just made an offer on a house, which has been accepted. They have applied for a 90% loan-to-value mortgage with a 20-year mortgage from Forest Bank. While they are both very happy with the property, Graham is anxious to ensure that the electrical system is up to modern standards. He has asked whether any electrical faults would be revealed in the normal mortgage and valuation process.
Hannah is a sales manager and has worked for her employer for two years. Her basic salary is £34,000 per annum plus commission, which was £8,000 last year but likely to be approximately £2,000 this year. Graham has worked as a designer for a furniture store for seven years, but he has had his hours reduced recently.
Hannah receives maintenance payments of £180 per month from her ex-husband in respect of her daughter. Graham receives an income of £1,200 per annum from an absolute trust set up by his grandfather.
Hannah and Graham have been offered a variable-rate mortgage with a 3% discount for the first three years, but they have not yet decided which repayment vehicle to use. Graham favours a stocks and shares ISA as the repayment vehicle. Hannah has a more cautious attitude to risk and prefers a repayment mortgage.
The bank has just completed a basic valuation of the property in order to assess its adequacy for mortgage purposes. Forest Bank requires mortgage payments to be no more than 80% of free disposable income, taking into account committed expenditure, basic essential expenditure and basic quality of living costs.
Questions:
1) When considering Hannah’s income for mortgage underwriting purposes, Forest Bank is most likely to request what regarding her commission?
1) Information about whether her commission income is sustainable or guaranteed
Case Study
Gerald and Yvonne married four years ago, the second marriage for both of them, and live in Gerald’s house. They have decided to convert the garage into additional living space and to build a car port by the side of the property to house their two cars. Yvonne’s youngest son still lives at home. He has just passed his driving test and Gerald and Yvonne would like to buy him a small car for about £5,000.
They have approached Gerald’s mortgage adviser to discuss a further advance of £35,000 to fund the work, pay off a personal loan of £10,000 and buy the car for Yvonne’s son. They feel that maintaining the personal loan and increasing the mortgage to cover the improvements and the car would stretch their finances. However, paying off the loan and adding it to the mortgage would be well within their financial capability.
Gerald took out the original building society mortgage for £140,000 before he married Yvonne, but they now realise that it would be a sensible move to arrange for the mortgage and property to be in their joint names. To achieve this, Gerald will gift to Yvonne half of the equity, and she has agreed to become jointly responsible for the mortgage. Yvonne works part-time earning £15,000 pa and Gerald earns £47,000 pa.
The current stamp duty land tax (SDLT) threshold is £250,000. The property is currently valued at around £280,000.
The mortgage has been operated satisfactorily, except for a short period three years ago when Gerald was between jobs and missed two payments, although Gerald settled the small arrears as soon as he started his new job. He has seen a number of advertisements in the press offering second mortgages on what appear to be good terms and would be interested in finding out if that would be a suitable way of raising the additional funds, having first switched the property and the existing mortgage into their joint names.
Gerald’s existing interest-only mortgage has been in place for 12 years and is supported by a 30-year low-cost with-profits endowment. Gerald bought the house after his divorce and felt it was important to keep costs to a minimum.
In the past few years, Gerald has received several letters from the endowment company about the probability of a £20,000 shortfall in the maturity value. Although he would like to keep the endowment as a repayment vehicle, he feels he should seek guidance in this area. Gerald and Yvonne feel that any additional borrowing should be on a basis that will provide certainty of repayment of the whole loan by the end of the mortgage term.
Yvonne’s older sister, a divorcee, is very close to her two adult children and would like as much of her estate as possible to pass to them on her death. She is about to reach the end of her £70,000 interest-only mortgage term, and she is worried because she has no repayment vehicle to repay the loan and has no significant savings. She is not due to retire until age 65, in eight years’ time. At the moment the mortgage payments are affordable and she feels this would not change when she retires. She loves where she lives and is worried that she might be forced to move in order to pay off the mortgage.
Questions:
1) What is likely to be the most appropriate solution to Yvonne’s sister’s problem?
Arrange a home reversion plan for the full mortgage amount now.
Arrange a retirement interest-only mortgage for the full mortgage amount now.
Arrange an interest roll-up lifetime mortgage now for the full mortgage amount
Settle the mortgage by selling her house and moving to a cheaper property.
2) If Gerald and Yvonne decide to raise a further advance with their present lender, Yvonne’s son may be required to WHAT?
3) Which of the following is the existing mortgage lender most likely to want to clarify before making Gerald and Yvonne an offer for the further advance they require?
The reason for earlier arrears.
The type of life policy they will be taking out.
That an NHBC registered builder will do the building work.
Whether planning permission is required
4) Which of the following is least likely to be required in relation to the new mortgage arrangement?
A credit search on both applicants.
A higher lending charge.
Evidence of income for both applicants.
Expenditure details for both applicants.
5) What information about Yvonne will the lender require, to consider the changes Gerald and Yvonne want to make to the mortgage?
A consent to mortgage form only.
Income details only.
Income and expenditure details together with information on the nature of her employment.
Nature of employment details only.
6) Gerald’s lender has issued a European Standardised Information Sheet (ESIS) for his planned further advance to fund the purchase of the car.
The lender must issue an ESIS to Gerald, with the ESIS:
-and the APRC based on the further advance only.
-and the APRC based on the new total mortgage loan.
-based on the further advance only and the APRC based on the new total mortgage loan.
-based on the new total mortgage loan and the APRC based on the further advance only.
7) In relation to Yvonne becoming joint owner and mortgagor of the property, the position regarding stamp duty land tax (SDLT) would be that SDLT would:
-be charged on the property value.
-be charged on 50% of the mortgage amount.
-be charged on 50% of the property value above the SDLT threshold.
-not be payable
8) Assuming Gerald did not intend to repay his personal loan from the further advance proceeds, when assessing affordability, the lender would regard the personal loan repayments as:
-basic essential expenditure.
-basic discretionary expenditure.
-committed expenditure.
-quality-of-living expenditure
9) Gerald’s endowment plan is most likely to be behind target because:
-reversionary bonuses have been lower than originally expected.
-terminal bonuses have been reduced in recent years.
-the insurer has applied smoothing to the annual returns.
-unit values have reduced due to poor investment performance
10) If Gerald did decide to apply for a second-charge loan rather than a further advance to his current mortgage, which of the following is true?
-A second-charge holder has equitable rights over the property.
-The second-charge loan is likely to be at a lower interest rate than the existing mortgage.
-The second-charge loan must end at the same time as the existing mortgage.
-There may be a restriction at HM Land Registry requiring the first-charge lender’s agreement for any second charge.
1 = B (25.8.2)
2 = C (26.2.1)
3 = D ( 26.2.1 and 26.2.2)
4 = b (27.4.4, 26.2, 15.7.1)
5 = C (27.4.4)
6 = A (26.4)
7 = D (27.4.9)
8 = C (10.8.1, Figure_10.6)
9 = A (21.2.6)
10 = D (26.6)
case study:
Over a year ago, John split up with his previous girlfriend, who moved out of their jointly owned London Docklands flat, which they bought for £680,000, although she is still registered as joint owner. John is now in a settled relationship with a new partner, who has moved in. She now wants to become joint owner on a 50/50 basis and contribute to both the mortgage and an appropriate capital repayment vehicle. They would prefer to own the property in a way that would allow their nominated beneficiaries to receive their share of the equity in the property. The flat has increased in value to £820,000 since the original purchase and the mortgage is £590,000, on a fixed-rate, interest-only basis.
As a result of recent events, John is now in arrears but has ignored several letters from his lender, Knightly Bank plc. He has asked for advice from an independent financial adviser on the way forward. John and his former girlfriend had arranged the mortgage on an ISA basis, but John has not contributed during the current tax year because of his financial problems. His new partner has contributed £4,000 to a cash ISA in the current tax year.
While John is currently in financial difficulties, he shortly expects to receive a generous legacy from his grandmother’s estate. The adviser has asked Knightly Bank how a partial repayment will be treated, assuming that the loan is then up to date.
John’s father has advised John that he should complete a budget analysis and factfind to ensure that his total outgoings can be fully assessed.
Questions:
1) John’s new partner may have to arrange her own capital repayment vehicle. This is because:
-John has not been paying into his ISA and his former girlfriend had her own ISA.
-John’s ISA contributions cannot be restarted without his former girlfriend’s agreement.
-the existing ISA is on a joint basis and the fund will be split 50/50 as a separation settlement.
-the lender can insist on John using the existing ISA funds to repay the arrears.
2) Assuming John and his new partner arrange ownership of the flat in a way that meets their requirements, which of the following is false?
-Both owners will be jointly and severally liable for the mortgage.
-John could not sell his share without his partner’s agreement.
-John will be able to leave his interest in the property in his will.
-On John’s death, his nominated beneficiaries could insist on the sale of the property.
3) Knightly Bank is unlikely to accept any approach with regard to the transfer of equity unless:
-John accepts an attachment of earnings order.
-John’s new partner has a suitable repayment vehicle in place.
-the issue that caused them to write to John is satisfactorily resolved.
-they can be satisfied with the stability of the new relationship between John and his new partner
4) Before his new partner can become joint owner of the flat, what additional payment is John likely to be required to make?
A higher lending charge.
A local authority search fee.
A mortgage cancellation fee.
A settlement to his former girlfriend
5) Assuming that it agrees to John’s new partner becoming party to the mortgage and she is able to help John cover his outgoings, Knightly Bank is most likely to address John’s current financial position by:
-adding a penalty rate to the mortgage interest.
-asking his former girlfriend to make an immediate lump-sum payment.
-increasing the outstanding capital amount.
-requiring higher monthly payments to settle the arrears over time.
6) Which of the following investments could John not hold directly in his stocks and shares ISA?
Gilts.
Open-ended investment companies (OEICs).
Property.
Unit trusts.
7) What initial advice should the adviser offer to John regarding his current circumstances?
-Approach Knightly Bank to discuss the situation.
-Ensure that his new partner signs a consent to mortgage form immediately.
-Obtain the relevant Citizens Advice information pack.
-Seek a new lender who will consolidate any arrears
8) In response to the adviser’s approach to Knightly regarding a partial repayment, the bank advises John that a specific fee will be charged due to the amount being repaid, which will reduce the amount of any payment made to reduce the mortgage.
This is because:
-a capital payment is required to John’s former girlfriend.
-of John’s poor payment record.
-the mortgage is still within a fixed-rate term.
-the payment will only be credited to the mortgage account at the end of the year.
9) If John’s new partner becomes joint owner and mortgagor, what is the position with regard to stamp duty land tax (SDLT), assuming a nil-rate threshold of £250,000?
-His partner could avoid SDLT by becoming joint owner but not joint mortgagor.
-His partner is likely to have to pay some SDLT.
-His partner will not pay SDLT if she is a first-time buyer.
-There would be no SDLT to pay under any circumstances
10) To achieve John and his new partner’s objective regarding flat ownership, they should arrange ownership on which basis?
Commonhold.
Joint tenancy.
Mutual tenancy.
Tenants in common
1 = A ( 22.1, 27.4.7)
2 = D (4.4.2)
3 = C (27.4.2, 27.4.5)
4 = D (27.4.1)
5 = D (28.2.1)
6 = C (22.1, 22.1.1, Figure_22.2)
7 = A (28.5)
8 = C (23.4, 27.5.2)
9 = B (27.4.9)
10 = D (4.4.2)
Case Study:
Shelley, a self-employed sole trader, has been building up her mobile beauty treatment business for five years. Now aged 30, she is ready to purchase her first property with a plan to live there for three to four years, after which she intends to make her next move. She has successfully offered £150,000 for a leasehold flat in eastern England and she has asked her building society mortgage adviser to arrange a mortgage for her. The flat is in a purpose-built block of four flats and the vendor advises that the upstairs neighbour is interested in buying the freehold. There remains a period of 85 years on the original 99-year lease. The current stamp duty land tax (SDLT) threshold is £250,000.
She has savings to cover legal and mortgage-related expenses and, with some help from her parents, can manage a deposit of £30,000. Shelley is keen to be able to budget in the early years of property ownership and wants some certainty of payments.
She has told her adviser that she plans to start a personal pension with Albion Life, and the adviser has explained how this may be used in conjunction with the repayment of her mortgage. He has also explained the merits of using a stocks and shares ISA as a repayment vehicle.
Shelley’s business has gradually grown, and her results for the past two years have shown gross profits of £32,000 and net profits, which she has taken as drawings, of £26,000. However, three years ago her accounts show that she took drawings of £2,000 in excess of her net profits when she had the opportunity of a trip to Australia to visit her brother.
Shelley’s younger sister, Becky, is interested in saving for a deposit with her boyfriend, with a view to buying a flat in two years’ time; they can save £100 a month each over the two years. When Shelley met her adviser in June 2020, Becky asked Shelley to find out from her adviser how a Lifetime ISA might be suitable for her
Questions:
1) In what way would a capped-rate mortgage suit Shelley?
-It would probably be the most cost-effective product in terms of monthly payments.
-It would provide her with a maximum monthly payment.
-She would be able to terminate the arrangement at any time without penalties.
-The costs of setting it up would be very low compared with a fixed-rate mortgage.
2) If Shelley’s purchase proceeds at her offer price, what is the position with SDLT? SDLT will:
-not be payable.
-be payable on the premium only.
-be payable on the premium and the ground rent.
-be payable on the premium, and the surcharge will apply to the ground rent
3) What figure will the lender use as Shelley’s income when assessing affordability? Her:
drawings.
gross profit.
gross turnover.
net profit
4) Which of the following is true in relation to Shelley seeking to extend the lease once she moves into the flat?
-Shelley will be able to apply to extend the lease after two years of ownership.
-The freeholder can always refuse the lease extension.
-The landlord can set any price for the lease extension they feel is appropriate.
-The lease extension will be for 99 years from the end of the current lease
5) Under current legislation, what is Shelley’s position with regard to the purchase of the flat’s freehold?
-At least three of the flat owners will need to participate.
-She may apply in conjunction with the upstairs neighbour.
-The outstanding lease term is too short to qualify.
-There are not enough flats in the block to qualify.
6) Which of the following is true when comparing a personal pension and an ISA as mortgage repayment vehicles?
-Contributions to both pensions and ISAs are eligible for tax relief.
-Income from an ISA is taxable, while income from a pension is tax free.
-She can access the ISA fund before the pension if she wants to repay the mortgage early.
-Shelley would be able to pay more into an ISA than a personal pension each year.
7) When assessing the affordability of Shelley’s proposed mortgage arrangement, which of the following would be classed as basic essential expenditure?
Clothing costs.
Credit card repayments.
Monthly loan payments.
Utility bills.
8) To use the tax-free lump sum from her pension to repay her mortgage, Shelley will need to accumulate a pension fund of at least:
£120,000.
£240,000.
£360,000.
£480,000.
9) Shelley was initially attracted to a five-year fixed-rate mortgage rather than a shorter fixed-rate or capped-rate deal. What is the most likely reason for her to decide that this was not suitable for her situation? The:
-early repayment charge.
-fact that the interest rate was fixed.
-interest rate charged.
-product fee.
10) Assuming Shelley’s sister Becky and her boyfriend each manage to save £100 a month for exactly two years in a cash-based Lifetime ISA, and assuming they had each accumulated £50 interest at that point, how much would they have in total towards their deposit?
£4,800.
£5,400.
£6,000.
£6,100
1 = B (23.5)
2 = A (15.9.1)
3 = D (10.5)
4 = A (4.5.4.2)
5 = B (4.5.4.1)
6 = C ( 22.1, 22.3.2)
7 = D (10.8.1)
8 = D ( 22.3.2 )
9 = A (23.4)
10 = D (22.1.1, 22.1.3)
Case Study:
Paul and Kelly, a recently married couple aged 37 and 29 respectively, are customers of Marsh Bank and they are seeking mortgage advice. Paul, a sole trader, works as a graphic designer. Paul’s father was subject to a bankruptcy petition six months ago and Paul is unsure how this might affect his proposed mortgage application.
Paul is self-employed and the very basic accounts he produces himself show steady levels of net profit. Last year he produced a gross profit of £49,000 on turnover of £55,000. The net profit was £45,000. Kelly is employed as a systems analyst and earns £24,000 pa.
They are looking to purchase a terraced house for £220,000 in Norfolk and calculate they will need a mortgage of £179,000. The house was built in 1940 and, due to its age, Paul and Kelly want to be sure that any defects in the property are identified before they agree to the purchase.
For the past ten years, Paul has had an interest-only mortgage of £68,000 with Marsh Bank on his flat, for which he has a unitised with-profits endowment policy as the repayment vehicle. Until moving in with Paul two years ago, Kelly lived with her parents. Paul and Kelly would like a degree of certainty regarding their mortgage arrangements and therefore wish their additional borrowing to be on a repayment basis. However, they would like to use the endowment as a repayment vehicle for £60,000 of the mortgage, which is the maturity value they are now expecting.
Marsh Bank’s adviser has recommended a three-year 3.85% capped-rate mortgage (compared with its standard variable rate of 4.00%), which Paul and Kelly are considering. The initial mortgage payments will be £800 per month.
Marsh Bank’s affordability criteria require mortgage payments to be no more than 85% of free disposable income, taking into account committed expenditure, basic essential expenditure and basic quality-of-living costs. The maximum loan to value (LTV) is 90% and a higher lending charge at a rate of 8% applies to loans above 80% LTV
Questions:
1) Paul is unsure what information the bank will require about his business income in order to assess his application.
Given his business situation, which documentation is he most likely to be able to provide?
Accountant’s certificate.
Detailed accounts.
HMRC self-assessment tax calculation.
Profit and loss account.
2) As part of the customer due diligence process, the lender has asked Kelly to produce evidence of her identity. Which of the following documents would not be acceptable?
Credit card statement.
Electoral roll entry.
Mobile phone bill.
Photo-card driving licence
3) Which of the following is false with regard to Paul and Kelly’s existing repayment vehicle?
-A market value adjustment may apply on encashment before maturity.
-Life assurance cover is an integral element of the policy.
-Premiums buy units in the with-profits fund.
-Unit values will rise or fall in line with the underlying fund(s) chosen.
4) The most appropriate survey report for Paul and Kelly to arrange in connection with their proposed purchase is:
-a basic valuation.
-a RICS Home Survey Level 1 Report.
-a RICS Home Survey Level 3 Report.
-an Energy Performance Certificate
5) As required, the adviser gave Paul and Kelly a European Standardised Information Sheet (ESIS) when making the recommendation. Assuming they go ahead with the recommended mortgage, for how long must Marsh Bank keep details of the ESIS?
One year.
Three years.
Five years.
Until the mortgage is redeemed
6) If Marsh Bank agrees to lend the amount Paul and Kelly require, and the property is valued at the agreed price, how much will the higher lending charge (HLC) be?
£240.
£1,760.
£3,280.
£3,520
7) Paul’s father was subject to a bankruptcy petition from creditors. This means he had unpaid debts of at least:
£500.
£750.
£1,000.
£5,000.
8) Paul and Kelly are likely to be aware of the endowment maturity value:
-due to the policy’s guaranteed maturity value.
-from reviewing recent stock market returns.
-from the provider’s past performance record.
-from the latest review issued by the provider.
9) With the mortgage product that Paul and Kelly are considering, the interest rate will:
- not change for the first three years.
-only change if the standard variable rate increases in the first three years.
-not rise above the stated level for the first three years.
-only change in the first three years when the standard variable rate decreases
10) Paul’s gross profit was £49,000 on a turnover of £55,000. The gross profit was arrived at by deducting from Paul’s business turnover:
-his income tax liability.
-his personal drawings from the business.
-his routine business expenses.
-the raw materials used for his business
1 = C (10.5)
2 = C (11.6)
3 = D (21.4)
4 = C (14.5)
5 = A (8.6)
6 = A ( 15.7.1 )
7 = D (2.7.3)
8 = D ( 21.3.2)
9 = C (23.5)
10 = D (15.9.1)
Case Study:
Greg and Cheryl have a £150,000 interest-only mortgage with Brunswick Building Society on a property they own on a joint tenancy basis. The mortgage is protected by a joint-life level term policy and has 18 years to run.
They originally arranged an ISA to repay the mortgage, but have not made contributions for two years, which leaves the projected fund short of the amount to repay the mortgage. They have also been concerned by recent volatility in stock markets and so are looking to switch the mortgage to a repayment basis.
Three years ago, they took out a five-year secured personal loan for £7,500, from Kenton Finance, the proceeds of which they used to buy a home entertainment system and some new furniture. Repayments on the loan are £155 per month.
Greg is employed as a full-time administration manager, earning £37,500 pa, and Cheryl is a full-time physiotherapist earning £24,500 pa. They have two children: Joanne, aged 24, who is employed and lives in a rented flat with her boyfriend, and Tom, aged 15, who lives at home.
Greg and Cheryl are planning to carry out a loft extension on their house and will use their ISAs towards the costs. They have now approached the society for a further advance of £20,000 to cover the remaining costs. The building society’s valuer has estimated that the conversion will increase the value of their property from £200,000 to £250,000.
Brunswick’s affordability criteria require mortgage payments to be no more than 80% of free disposable income, taking into account committed expenditure, basic essential expenditure and basic quality-of-living costs. The maximum loan to value (LTV) is 85%. A higher lending charge applies if the LTV exceeds 80%, based on the increased valuation
Question:
1) What requirement for additional security, if any, is likely to be a condition of the offer by the building society if the further advance application is approved?
-A higher lending charge.
-Assignment of the existing endowment policy.
-Mortgage payment protection insurance for both Greg and Cheryl.
-None
2) Assuming the new arrangement is over the remaining term of the current mortgage, what is most likely to be the best way to cover the mortgage in the event of either Greg or Cheryl dying during the term?
-Cancel the existing policy and arrange a joint-life mortgage protection assurance policy for £170,000.
-Leave the existing policy in place and arrange a joint-life mortgage protection assurance policy for £20,000.
-Leave the existing policy in place and arrange a joint-life mortgage protection assurance policy for £170,000.
-Use the existing policy convertibility option to arrange a joint-life mortgage protection assurance policy for £170,000
3) Which of the following will not be required in connection with Greg and Cheryl’s application?
-A signed consent to mortgage form.
-An updated credit search.
-Confirmation of Cheryl’s earnings.
-Details of the outstanding personal loan
4) One option Greg and Cheryl have considered is to raise the additional funds through a remortgage.
What advantage does a further advance offer them over a remortgage?
-No stamp duty land tax would be payable.
-The lender would not be required to carry out a full affordability assessment.
-The lender would not have to carry out an assessment of the property value.
-The total costs for the arrangement would be lower
5) How will the personal loan arrangement affect Greg and Cheryl’s application?
-MCOB rules require the personal loan to be repaid as a condition of making the further advance.
-Monthly payments will be taken into account when assessing affordability.
-The personal loan will automatically be tacked on to the mortgage.
-The valuation of the property for mortgage purposes will be reduced by the amount of the outstanding personal loan.
6) Which of the following will the building society require when processing Greg and Cheryl’s application?
-Confirmation from Kenton Finance that the further advance meets affordability criteria.
-Evidence that planning permission has been granted or is not required.
-Evidence that the design of the extension is in keeping with the neighbourhood.
-Prior consent of their buildings insurance provider.
7) How are Greg and Cheryl’s payments to Kenton Finance likely to be treated by Brunswick Building Society in its assessment of affordability, if at all?
-As a basic quality-of-living cost.
-As basic essential expenditure.
-As committed expenditure.
-They are unlikely to be included
8) In the event of Greg dying before Cheryl, his portion of the property will:
-be shared between Cheryl and Joanne only.
-pass as a life interest to Cheryl and then to the children on her death.
-pass as directed by his will.
-pass automatically to Cheryl
9) The term of the further advance offered by Brunswick is most likely to be:
-a term chosen by Greg and Cheryl.
-no longer than the date of Greg’s or Cheryl’s retirement, whichever is later.
-the residual term of the existing endowment policy.
-the residual term of the existing mortgage.
10) In relation to the further advance, when might tacking be required? If:
-Brunswick Building Society postpones its prior charge.
-the personal loan is consolidated.
-Kenton Finance does not agree to the further advance.
-the original mortgage deed does not oblige Brunswick Building Society to make further advances.
D
B
A
D
B
B
C
D
D
D
Case Study:
James and Diane, aged 32 and 30, purchased their flat four years ago for £130,000 with the help of an interest-only mortgage for £90,000 over a 25-year term. They set up stocks and shares ISAs as repayment vehicles, with a joint-life level term assurance policy to pay off the mortgage in the event of either death. They are now divorcing and have agreed that James will pay £40,000 to Diane in return for taking full ownership of the property, which is now thought to be worth approximately £160,000.
James has approached his mortgage adviser, Osmans plc, for advice on the possibility of seeking a further advance from his existing lender, London Bank, to fund the agreement. Diane has already vacated the property.
James expects that his new partner Sally, aged 31, will move into the property with him in a few months’ time. He would like her name to be added as joint owner and mortgagor as soon as Diane has been released from her obligations. Sally regularly invests in a stocks and shares ISA and has told James that she would be happy to use an ISA as a mortgage repayment vehicle
QUESTIONS:
1) James has been advised that if his application is successful, a new mortgage deed may not need to be drawn up. This is most likely to be because:
-it will be a second charge.
-the current mortgage obliges the lender to make further advances, subject to certain criteria.
-the loan will be exempt from regulation as it is not a new mortgage.
-there are no subsequent charges registered against the property
2) If Sally moves in with James but she does not become a party to the mortgage, what, if anything, will the lender require?
Completion of a consent to mortgage form.
Confirmation of Sally’s income.
No further action will be required.
The consent of the freeholder.
3) What form of additional security is the lender most likely to require if the further advance is agreed?
A higher lending charge.
A personal guarantee.
A signed disclaimer from Diane.
Reassignment of the low-cost endowment policy
4) Once the transfer of equity has been finalised, what should happen to the mortgage repayment vehicles?
James and Diane can each use their ISA as they see fit.
James and Diane must agree to release each other’s ISA from the mortgage account.
James’s ISA will have to be assigned to the lender.
They must be surrendered immediately, with the proceeds being applied to the mortgage account
5) James has asked Osmans plc what additional actions may be required by London Bank when processing his application. Which of the following will not be required?
A credit assessment check on Diane.
A property valuation.
Confirmation of James’s current income.
Diane’s agreement
6) Which of the following is the lender likely to consider to be of most importance if Sally is to be added to the mortgage deed?
A property valuation.
Confirmation of Sally’s ISA fund.
Evidence of a satisfactory credit history for Sally.
The consent of the endowment provider
7) How does a stocks and shares ISA differ from a qualifying unit-linked endowment policy as a potential mortgage repayment vehicle?
ISA investment is equity-based.
ISAs are not subject to any tax charges at the end of the mortgage term.
ISAs cannot be held in joint names.
ISAs do not guarantee a maturity value
8) What is the position with regard to stamp duty land tax (SDLT) if Diane transfers her interest in the property to James in return for a £40,000 payment, and Sally moves in with James?
-Diane will have to pay SDLT because James is paying her a lump sum to buy out her share.
-James will have to pay SDLT because Diane is transferring her share to him in return for a lump-sum payment.
-Nobody will be required to pay SDLT.
-Sally will have to pay SDLT because she will be living in the property.
9) f Sally does become party to the mortgage, what would be the best way to utilise ISAs to achieve her objective?
-Continue with her existing ISA, with a possible increase in contributions.
-Start a Help to Buy (HTB) ISA with maximum contributions.
-Start a Lifetime ISA with maximum contributions.
-Switch her existing investment to a Cash ISA with a possible increase in contributions.
10) In relation to the proposed divorce settlement, before releasing Diane from the mortgage deed, the lender will:
-ask Diane to act as guarantor for James.
-carry out a search on Diane’s credit file.
-carry out an assessment of James’s ability to service the loan on his own.
-require Sally to be a party to the mortgage immediately
B
A
A
A
A
C
C
C
A
C
Case Study:
Alec and Clare have lived in a rented flat since they were married two years ago. They have approached Western Bank to discuss the possibility of obtaining a mortgage for a leasehold flat they are hoping to purchase in the South West of England, having successfully negotiated a £6,000 reduction on the original asking price of £264,000. The flat is one of two above a high-street shop and has an unexpired lease of 75 years. Each flat and the shop have equal floor areas. This will be Clare’s first property purchase, but Alec sold his first flat five years ago when he divorced; he has rented since then.
Alec and Clare are both in full-time employment, earning guaranteed basic salaries of £44,000 and £40,000 respectively. They have asked the adviser for some information on individual savings accounts (ISAs), as a friend has suggested that it might be a good idea to use one of these as the repayment vehicle for an interest-only mortgage.
Alec and Clare want the security of knowing the maximum monthly payment that they will be required to make. Western Bank’s standard variable mortgage rate is currently 3.99% and the Bank of England base rate is 0.5%. They want the cheapest valuation option offered by Western Bank and are keen to protect the mortgage with suitable life assurance.
Western Bank’s affordability criteria require mortgage payments to be no more than 80% of free disposable income, taking into account committed expenditure, basic essential expenditure and basic quality of living costs. The maximum loan-to-value (LTV) ratio is 90%. Additional security is required if the LTV ratio exceeds 80%
Questions:
1) With regard to the repayment vehicle in which they are interested, and their desire for protection, of what should Alec and Clare be made aware?
-Combining their chosen repayment vehicle with mortgage protection assurance will guarantee full repayment on death.
-The need for protection is reduced due to the guaranteed maturity value of their chosen repayment vehicle.
-Their chosen repayment vehicle automatically includes life assurance cover.
-Their protection product should cover the loan amount independently of their repayment vehicle
2) If Alec and Clare proceed with their preferred valuation option, what detail will this confirm?
-The amount for which the property should be insured.
-The potential rental value for the property.
-Whether the electrical system meets current standards.
-Whether the plumbing system meets current regulations
3) Which of the following is false in relation to the type of repayment vehicle being considered by Alec and Clare?
-It may enable the mortgage loan to be repaid early.
-The maturity date is fixed to coincide with the end of the mortgage term.
-The proceeds payable will be free of capital gains tax.
-There is a wide choice of funds in which contributions can be invested
4) Which of the following mortgage products would be most suitable for Alec and Clare?
A capped rate of 4.4% for two years with a current charging rate of 4.2%.
A discounted rate of 1.0% below the standard variable rate for a period of five years.
A standard variable rate, currently 4.2%.
A tracker set at 2.5% above the Bank of England base rate
5) If the Western Bank adviser recommends a specific mortgage product to Alec and Clare, which of the following is a requirement under rules contained in MCOB 5A (pre-application disclosure)?
When the adviser provides a European Standardised Information Sheet (ESIS) they must:
-confirm that Alec and Clare have a 14-day reflection period when they apply.
-keep a record of the recommendation and the ESIS for at least three years.
-provide additional information about foreign currency loans.
-provide an adequate explanation of the product and the content of the ESIS
6) Assuming that they meet the lender’s affordability criteria, and the property is valued at the agreed price, the maximum that Alec and Clare would be able to borrow is:
£206,400.
£219,300.
£232,200.
£245,100.
7) Which of the following is true in relation to Alec and Clare’s potential stamp duty land tax (SDLT) liability, assuming a nil-rate threshold of £250,000?
-Clare can claim the first-time buyer exemption from SDLT on her share only.
-SDLT will be charged on the price paid for the flat and a multiple of the annual ground rent.
-They will be able to claim the first-time buyer exemption from SDLT.
-They will pay SDLT on the price paid for the flat only
8) In comparison with a similar sized flat in a purpose-built block in the same area, Alec and Clare should understand that their flat is likely to be valued at a:
- lower price.
- much higher price.
- Similar price.
-slightly higher price.
9) Which of the following statements is true in respect of the additional security that the bank would require if a mortgage application is approved, the property is valued at the agreed price, and Alec and Clare provide a £45,000 deposit?
- It may be possible to add the amount charged to the advance.
-Its primary purpose is to protect Alec and Clare’s interests.
-The bank must encourage Alec and Clare to seek independent legal advice.
-The security must be assigned to the bank
10) With regard to the freehold of the flat, which factor would prohibit its purchase under the Commonhold and Leasehold Reform Act 2002? The:
-floor area of the shop.
-number of flats in the block.
-purchase price of the property.
-remaining term of the leas
D
A
B
A
D
C
D
A
A
A
Case Study:
David and Francesca are in their mid-50s and have lived in their detached house for 15 years. They have decided to downsize and have had an offer for £230,000 accepted on an ideal two-bedroom house in East Yorkshire. Unfortunately, they have not yet found a buyer for their existing house, although they are confident that they will find a buyer soon. They have ten years left on their current repayment mortgage and are seeking advice on the best mortgage for their new purchase. They expect the sale will allow them to reduce their current borrowing by £40,000 and allow them to help their daughter with a deposit for a flat. They have £10,000 savings that they do not wish to use for the house purchase, as they feel they need some money behind them ‘just in case’.
They finished a three-year fixed-rate term on their current mortgage six months ago.
In order to meet their requirements, their mortgage adviser has suggested a £50,000 offset mortgage with the Uptown Building Society, with an interest rate fixed at 1.5% for two years and then reverting to the lender’s standard variable rate, currently 5%. The adviser has suggested they hold their savings in an account linked to the mortgage account but has also mentioned that the building society’s current fixed-term savings rate is 2%.
Their adviser has also discussed the option of bridging finance if they want to go ahead with their purchase before they have sold their current property but has stressed that they should only consider it if they have exchanged contracts on their sale.
David and Francesca are hoping to provide their daughter with a deposit for her first flat, which she has agreed to buy for £150,000 from a young couple looking to move up the property ladder. David has considered acting as a guarantor for her mortgage, if necessary. As an alternative, they have discussed David becoming a joint owner to help with the affordability assessment but are concerned that this could result in his daughter losing her stamp duty land tax (SDLT) exemption and incurring a potential SDLT surcharge.
QUESTIONS:
1) If they decide to go ahead with the offset mortgage and deposit their savings in a linked savings account, which of the following is true? They will:
-pay mortgage interest on a mortgage balance of £40,000 only.
-receive interest of 1.5% on their savings.
-receive interest of 2% on their savings.
-receive interest of 5% on their savings
2) What is the position with stamp duty land tax (SDLT) if David and Francesca buy the new property before they sell their existing property?
-As the new property price will be lower than their original property, no SDLT surcharge will be due at any time.
-The new purchase will be subject to a non-refundable 3% SDLT surcharge.
-They will pay the standard rate of SDLT at the time of the new purchase, but will have to pay a 3% SDLT surcharge if they do not sell their old home within 12 months.
-They will pay a 3% SDLT surcharge on the new purchase, but can reclaim it if they sell their old home within 36 months
3) How might David implement his alternative option to increase his daughter’s affordability without it resulting in the problems he is concerned about?
-They could arrange a joint borrower, sole proprietor mortgage.
-They could take out a shared ownership arrangement.
-They should ensure the mortgage is below the stamp duty land tax threshold.
-There is no way for David to avoid the problems
4) If David were asked to act as guarantor for his daughter’s mortgage:
-he would always have to agree to take responsibility for the whole mortgage.
-he would have the right to withdraw from the arrangement at any time.
-the lender would have to provide David with independent legal advice before he agreed to act as guarantor.
-the lender would need to be sure that David could afford to pay the mortgage if his daughter could not
5) Regarding David and Francesca’s proposed new home, which of the following is not a right the lender has in relation to buildings insurance? The right to:
-have its interest noted on the policy.
-Insist any claim proceeds are used to repair damage or reduce the mortgage.
-insist on a specific insurer or insurance policy.
-set minimum standards for policies chosen by borrowers
6) If David became a guarantor for his daughter’s mortgage, which of the following could be grounds for the guarantee to be ruled invalid?
-David has an existing mortgage liability.
-Lack of affordability and incorrect independent legal advice.
-Lack of affordability and undue influence.
-Misrepresentation and undue influence
7) Which of the following would not apply at the point when David and Francesca apply for a bridging loan?
A valuation fee.
An application fee.
Local search fees.
Stamp duty land tax.
8) Which of the following is true in relation to bridging finance?
-Bridging finance is usually available up to 100% loan to value.
-Bridging loans are typically arranged on an interest-only basis.
-Bridging loans with a term of six months would always be regulated MCD loans.
-Lenders will always expect regular interest payments to be made
9) Which of the following is most likely to be true with regard to the repayment of David and Francesca’s existing mortgage?
-The lender could apply to court to obtain a clog on the equity of redemption.
-They will be charged a mortgage exit fee.
-They will be charged an overhanging early repayment charge if they repay the loan.
-They can repay the mortgage only at the lender’s discretion
10) With reference to David and Francesca’s adviser’s suggestion of bridging finance, what type of bridging loan was the adviser suggesting?
Closed.
Flexible.
Interim.
Open
A
D
A
D
C
D
D
B
B
A
