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Cemap 2 > Final Rev > Flashcards

Final Rev Flashcards

1
Q

Record keeping
1 year

3 years

Mortgage Term

A

MO hired to do ESIS/KFI Promotion - 1 year

Execute the Arrear - 3 years

How to jutify such decisions - Mortgage Term

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2
Q

Chen is applying to vary the terms of an existing MCD-regulated mortgage, how much reflection period he has?

A

“MCOB 6A sets out a requirement for a seven‑day reflection period once
a binding offer is made for an MCD-regulated mortgage but as Chen is
applying to vary the terms of an existing MCD-regulated mortgage, neither
the requirement for a binding offer nor the seven‑day reflection period
apply”

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3
Q

“ICOBS rules apply to ALL protection policies?

A

NO, only Pure protection policies fall under ICOBS.
So Term insurance, CIC, IPI, ASU, and MPPI fall under ICOB. Also, Building and Content Insurance falls under ICOB
But Endowments, Whole-of-life plans are not under ICOBS”

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4
Q

Do annuities cease on death?

A

“An annuity (which pays an
income in retirement), will cease on death unless there is
annuity protection or a guarantee period.”

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5
Q

Glen owns a third share in a buy‑to‑let flat, valued at £100,000,
which he intends to keep. He is now buying a house for his
family. Glen would not have to pay 3 per cent stamp duty land
tax surplus on his new purchase. True or false

A

True: as the value of Glen’s share in the buy‑to‑let flat is below £40,000,
it would not be treated as a ‘major interest’ which means the surcharge
would not apply

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6
Q

Clive is the joint owner of his family home worth £300,000 in England and is planning to buy a half share in a buy‑to‑let studio flat, valued at £78,000. Would he have to pay the SDLT surcharge on his share of the studio

A

Yes.

on buy‑to‑let and second homes,

the nil‑rate band only applies to purchases below £40,000 (instead of £125000 for the first home)

So on properties costing £40,000 and above, SDLT is payable, and also an additional 3% surcharge is payable

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7
Q

Joe is buying seven buy‑to‑let flats in one transaction. He can
choose to pay SDLT at the commercial property rate. True or
false

A

True, but he cannot also use multiple property relief

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8
Q

When using WoP, if the underlying plan is on a joint-life basis
the WoP is always available to both of the lives assured.

A

False

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9
Q

MPPI usually allows one claim or multiple claims?

A

MPPI usually allows more than one claim to be made if premiums are maintained

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10
Q

Do base‑rate tracker
mortgage have application and early repayment fees.

A

Generally Yes

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11
Q

The order of priority for legal charges on the registered property is established by?

Compare the above question to this one

Does the legal Charge take place on the Completion Date or on Land Registry later date?

A

the date of the charge’s registration at the Land Registry

Legal Charge takes place on Completion Date, though it gets registered at Land Registry later on

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12
Q

Search 5 business days, 15 businesss days rules

A

5 business days - ESIS, illustration to be sent to customer if recommendation was made on phone

15 business days - lender to notify about Arrears

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13
Q

BTL are Pure Interest-only mortgages?

A

Mostly Pure Interest-only mortgages - with no repayment vehicle needed

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14
Q

BBTL Criteria, owner/relative never lived in it, correct?

A

Correct

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15
Q

BBTL Criteria, less than 40% of land is used as residential, or even if more than 40% is used as residential but it is used for hotel/B&B etc?

A

Yes

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16
Q

Mortgage is regulated if the borrowing is secured on a residential premise, even if the money is to be uses for business purposes

A

Yes, the residential premise definition is 40% land used for a dwelling

Individual on Residential Premise - Regulated
Individual on Business Premise - NOT
Business on Residential Premise - NOT
Business on Business Premise - NOT

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17
Q

SVR rate mortgages have portability option?

A

generally do not offer Portability Option (buying next property) as rates need to change frequently and portability takes time so lender may incur losses.

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18
Q

If the mortgage is to be arranged directly from the lender, it is the lender’s
job to provide the disclosure information. Where the mortgage is arranged
through an intermediary, it is the intermediary who must provide the disclosure
information

A
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19
Q

“MCOB
1 - A (application of MCOBS)
2 - General

3 - Marketing

4 5 6 7 - Disclosures
* 4 Initial - about the firm
*5 Pre-App - ESIS/KFI
*6 Offer - Revised ESIS/KFI, Binding
*7 Contract - future actions after contract

”
“8-9 Equity release (Advise, Product)

10 - APR/APRC

11 - Responsible
12 - Charges

13 - Arrears, Possession”

A
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20
Q

Legal owners Vs Equitable (beneficial) Owner

A

Up to 4 people allowed to be registered as Legal Owners of a property. 5th person onwards can be referred to as Equitable (or beneficial) Owners who do not have the right to transfer legal ownership

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21
Q

Statutory Right to extend a lease?

A
  • Statutory Right to extend - after 2 years lease (90 years for Flat, 50 years for house)
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22
Q

Enfranchisement is
Right to manage is

A

Enfranchisement
Right of leaseholders to buy freehold

Right to Manage (RTM)
Right of leaseholders to take over management of the building

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23
Q

Qualifying Leaseholder

1) qualifying tenants - minimum years of original lease?

2) qualifying building
* how many of total flats must be Qualifying tenants , and how many must agree
* Max xx% non-residential area, apart from Stairs & common areas

Leaseholder cannot be a Quaifying tenant if:
1) ?
2) ?
3) ?

The building cannot be a qualifying building if?

minimum how many flats can technically qualify to buy freehold

A

1) qualifying tenants - 21+ years of original lease
2) qualifying building
* two-third of flats must of Qualifying tenants (which satisfied another condition of min 2 flats), and half must agree
* Max 25% non-residential area , apart from Stairs & common areas

Leaseholder cannot be a Quaifying tenant if:
1) flats was given on a charitable basis
2) Lease is for commercial purpose
3) Leaseholder owns more than 2 flats in building

Bulding cannot be a qualifying bulding if
Converted property of four or fewer flats, and (not or) Landlord himself is living in one of those four flats (called Resident Landlord)

NOte: Only 2 flats can technically qualify to buy freehold

24
Q

Surety from guarantor?

A

Surety
Some banks ask gurantor to open a saving account, put the gurantee amount and then lock that for few years to recover loan if and when needed.

25
Q

RICS Level 2

A

RICS Level 1 + CDE (Closer inspection, Damp, Energy Efficiency)

Main different - ARM (advice on repair and maintenance)

26
Q

“Planning Consent exemptions

A

Highway?
Back allowed to get closer, not front/side

How long new extension extend earlier wall?
two story 3 meters (also gap from rear 7m)
single storey - 8 meter detatched, 6 meter other

Height?
always below max-height

Loft?
50sqmt for detached and 40sqmt others

27
Q

“Building regulation

A

About Health & Safety of building and energy conservation (so need to be followed even if planning permission is exempted)

Covers: extending, modifying building, removing internal walls, wall insulation, loft conversions

Exempt; Carport upto 30 sq mt, and detached garage under 30 sq mt, new garden/boundary wall

28
Q

Susidence & Heave reasons

A

Subsidence
Clay, Water table drop, tree root drying soil, pipe leaks

Heave
Clay, removal of trees, chemical reaction

29
Q

Marriage value

A

is the increase in the value of the property with less than 80 years lease left, following the completion of the lease extension of further 90 years, reflecting the additional market value of the longer lease. The freeholder (permanent owner) recieves 50% of marriage value from leaseholder after lease extention is completed. Plus he also gets Diminution value which compensate him for money lost by extending lease for 90 years

30
Q

SDLT For partners/spouse living together, property owned in the sole name of one partner will be regarded as being jointly‑owned for the purposes of SDLT

A

True

31
Q

“SDLT for BTL and Second Homes

A

*extra 3% surcharge if property value £40k+
*Applied if owners previous share in first home is more than £40k+ for each owner
* In the case of joint borrowers, the surcharge applies if just one of the buyers owns another property
* Can be claimed back if first main residence is sold within three years, leaving only one main residence.

Number of BTL properties dont matter.

Rental income is taxed as non-earned income, even if one leave it in business account.

Mortgage interest is no more an allowed expense to reduce taxable income, but 20% of interest paid can be claimed as Tax relief

On sale, the CGT applies as expected, but SDLT paid can be deducted as allowable expense.”

32
Q

Insurarer is allowed to consider claims made, to increase the premiums of IPI?

A

YES

33
Q

PPI are actually ASU policies? More than one claim allowed?

A

YES, and YES

34
Q

SSP rule

A

SSP lathi-charge from 4 days to 28 weeks

35
Q

Qualifying policy rule

A

“75% x 10 year rule
75%
Twice

Additional rule
premiums to qualifying policies are limited to £3,600
per year. The limit applies to all policies held by the same individual, not per
policy. In the case of joint owners, each is limited to £3,600 per year”

36
Q

Credit Impaired Rule

A

3 (3 (3 X 2) X 500) Credit Impaired Rule

37
Q

if the buyer owned a property, but on a lease with less than 21 years to run, they can be deemed as
first‑time buyer and would be eligible for the exemption on buying a second property

A

yes

38
Q

if one of the joint owners owns, or previously owned, property then
the SDLT exemption will not apply

A

yes

39
Q

Andrew is concerned about any potential tax penalty should his pension fund exceed the Lifetime Allowance when he comes to take benefits. What potential charges would apply to the excess over the allowance?

A

A charge of 25% if the excess is used to provide an income, or 55% if it is used to provide a lump sum.

40
Q

Assuming Andrew is a higher-rate tax payer, how would he receive tax relief on his pension contributions? He would pay his contributions:

gross and receive all tax relief through self-assessment.

net of basic-rate tax and claim additional tax relief through self-assessment.

gross through his business, which is responsible for claiming his tax relief.

net of basic and higher-rate tax

A

net of basic-rate tax and claim additional tax relief through self-assessment.

41
Q

Receipt of which benefit would result in Carol’s application for Support for Mortgage Interest (SMI) being declined?

Contribution-based Job Seeker’s Allowance.

Income-based Employment and Support Allowance.

Income Support.

Universal Credit

A

Contribution-based Job Seeker’s Allowance.

42
Q

Key diffrence between ASU, PPI, MPPI

versus
CIC and IPI insurance is

A

Duration
ASU, PPI, MPPI payout max two years

while
CIC is one time big lump sum

and
IPI is long term regular income protection

43
Q

Only only policy given LONG TERM and REGULAR income benefot

A

IPI

44
Q

The basic valuation carried out resulted in the need for an undertaking may also mean

the lender may require a second inspection, although this is not always the case.

A

True

45
Q

Decreasing term insurance also mean that Premiums will decrease too?

A

No premiums stay constant.

46
Q

Difference between MPI and MPPI

A

The second one contains the word ‘Payment’ which means it is to protect monthly payments

while the MPI is to protect the WHOLE mortgage in death (it is a type of decreasing term insurance)

47
Q

A single endowment policy can be changed to a joint endowment policy?

A

NO

48
Q

If there is a shortfall in the mortgage amount needed, after considering the loan needed by the customer (after deposit) and the maximum LTV bank can provide, the bank may agree to provide extra money by asking for additional security. What is true about that additional security;

It may be possible to add the amount charged to the advance.

The security must be assigned to the bank.

A

Correct Answer
It may be possible to add the amount charged to the advance.

Incorrect Response
The security must be assigned to the bank.

The additional security MEANS the question is about higher lending charges.

The lender may use this to purchase a mortgage indemnity guarantee policy, but it will not be assigned.

49
Q

Married couples now renting are buying a property. One never owned a property, and another owned a property but sold it later and now own nothing. Can they claim first-time buyer exemption for SDLT?

A

NO

Even if one owned it in past, they are not first time buyers. Doesnt matter if that property is now held on or, was sold off.

Yes, the surcharge is not payable as they will own only one property at a time, but reduced SDLT rates for first time buyer are not applicable.

50
Q

A buyer wants the cheapest valuation option. What is true

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.

A

The amount for which the property should be insured.

Alec and Clare want the cheapest survey, which MEANS they want a basic valuation

A basic valuation only provides a value for lending purposes and a reinstatement value for insurance purposes.

A RICS Home Survey Level 1 or Home Survey Level 2 Report should give at least some detail on electrics, and a RICS Home Survey Level 3 Report would include an inspection of the state of the electrical system, but these would be more expensive.

51
Q

Basic Valuation Report for Lender, which is the cheapest too for buyer (as he pays for it).

A

Main purpose here is to provide the lender an estimate of the value (both resale & reinstatment) so that loan can be isues or not. Plus any recommendations about ‘Undertaking’ or Retention are made to lender.

52
Q

If the lender does require an undertaking to complete the essential external decoration, when must this decorating be done?

After an exchange of contracts but before completion.

Any time before the end of the mortgage term.

Before exchange of contracts.

Within a specified time following completion

A

Within a specified time following completion

53
Q

The customer wants to protect his mortgage payment if he is made redundant or has an illness that lasts longer than three months, at the cheapest cost available, what is the best option?

PPI
or
IPI

A

The product that would meet Nathan’s needs for cover against illness and redundancy at lowest cost is mortgage payment protection insurance (MPPI). The deferred period for MPPI would usually be 28 days or one month. A deferred period of 13 weeks would be appropriate for income protection insurance.

54
Q

The deferred period of MPPI and IPI policies

And how long benefits are paid

A

defer period one month for MPPI, benefits are paid for max 2 years

IPI defer period could be anywhere between 1 month to 1 year, and benefits are paid lifelong (upto retirement, death, rise in income etc)

55
Q

James is buying Sally’s share of the property by paying £40k after the divorce. How much SDLT is payable

A

NIL. They are divorcing so no SDLT

The first thing for any SDLT calculation is to check whether the case is about divorce or separation, if yes, no SDLT.

56
Q

A number of claims can be made on
CIC
IPI
ASU

A

CIC - one claim only, the policy ceases after that

Even if CIC is a Combined-needs CIC which is a combo of CIC+Life Assurance, the life part ceases when CIC claim is paid out

IPI - Multiple claims can be made for successive illnesses

57
Q

Why is there is suvivial period of 14-28 days after buying a CIC policy?

A

To aviod someone buying such insurance when they are already too sick or about to die.

Cemap 2 (1 decks)

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