MOCK EXAM 3 Flashcards
Which one of the following is a difference between a lifetime mortgage and a home reversion scheme?
A. Interest rates on a home reversion plan tend to be higher.
B. The plan holder retains property ownership with a home income plan.
C. The plan holder retains the right to remain in the property with a reversion scheme.
D. The reversion plan can provide cash and/or income.
B. The plan holder retains property ownership with a home income plan.
Mike and Kate are wondering which type of mortgage would suit them best, as they are concerned about interest rate volatility. Which statement is true of the interest rate options facing them?
A. Interest rates for fixed rate mortgages are directly linked to the rate paid to investors.
B. Rates on a Bank of England base rate tracker mortgage will change, if at all, every two months.
C. Rates on a LIBOR linked mortgage will usually change, if at all, every three months.
D. Standard variable rate mortgages offer a degree of stability against interest rate rises.
C. Rates on a LIBOR linked mortgage will usually change, if at all, every three months.
Which of the following is true of a regulated home reversion plan?
A. reversion plans do not offer a drawdown facility
B. interest rates tend to be higher than on lifetime mortgages
C. when initially established, the plan must have a term of at least 20 years.
D. there is a monthly rent of £12.
C. when initially established, the plan must have a term of at least 20 years.
Home income plans are designed for which category of customer?
A. Customers who wish to maximise their children’s inheritance.
B. First time buyers.
C. The elderly.
D. The self-employed.
C. The elderly.
With an Ijara mortgage the:
A. bank buys the property and sells it immediately to the borrower at a higher price.
B. first payment is usually 20% of the puchase price.
C. maximum term is usually 15 years.
D. monthly payment is fixed for 12 months at a time.
D. monthly payment is fixed for 12 months at a time.
What is the purpose of a convertible term assurance plan? To:
A. Allow the addition of a second life durng the policy.
B. Allow the term to be increased without any increased premiums.
C. Enable the plan holder to convert it to a whole of life or endowment policy.
D. Enable the sum assured to increase without any evidence of health.
C. Enable the plan holder to convert it to a whole of life or endowment policy.
Which of the following is a standard peril that is covered by almost all buildings insurance policies?
A. Accidental breakage of fixed sanitary fittings.
B. Damage caused by the escape of oil, in all circumstances.
C. Damage to a heating system caused by corrosion.
D. Theft and attempted theft.
D. Theft and attempted theft.
Which one of the following is an advantage of a home reversion scheme when compared to a lifetime mortgage?
A. Cash or income produced will be at a discount to the real value of the property.
B. No interest is payable or charged.
C. The borrower’s estate will always benefit from increases in the property value.
D. The plan holder can stay in the property for life.
B. No interest is payable or charged.
Which of the following could be seen as disadvantage of a ‘roll-up’ lifetime mortgage?
A. Ownership transfers to the provider.
B. Taking out such a plan could lead to reduced State benefits.
C. The borrower could build up a negative equity situation.
D. The owner loses all rights to any increase in the property value.
B. Taking out such a plan could lead to reduced State benefits.
A deed of postponement might be necessary if:
A. a borrower wishes to extend the term of the mortgage.
B. a mortgage contract does not contain an obligation for the lender to make further advances.
C. a property owner wishes to arrange a second charge.
D. one party wishes to be removed from a mortgage.
B. a mortgage contract does not contain an obligation for the lender to make further advances.
What specific feature of a mortgage can avoid the need for ‘tacking’?
A. Daily calculation of interest.
B. Drawdown facility.
C. Early repayment charge.
D. Fixed rate of interest.
B. Drawdown facility.
Harry and Rebecca are considering taking advantage of their existing lender’s latest fixed rate deal by switching from their variable rate mortgage. They will not raise any additional capital and the mortgage would represent 82% LTV compared to the original 94%. Which one of the following would be true of their proposed action?
A. It is likely to be less costly to arrange than a remortgage.
B. The switch is likely to be cost free.
C. They may have to pay another higher lending charge.
D. They would have to allow for conveyancing costs.
A. It is likely to be less costly to arrange than a remortgage.
Which of the following is true where a remortgage is arranged as part of a debt consolidation programme?
A. It is likely to increase the risk of the property being repossessed.
B. The homeowner’s overall borrowing risk will be reduced by securing the loans in this way.
C. The interest rate will be higher to reflect the reason for the additional borrowing.
D. The lender will not impose a higher lending charge.
A. It is likely to increase the risk of the property being repossessed.
What risk is a borrower taking by consolidating unsecured debts into a repayment mortgage?
A. The increased risk of negative equity at some point in the future.
B. The risk that mortgage interest rates might be higher than for unsecured borrowing.
C. The risk that the associated investment vehicle will fail to repay the capital at the end of the term.
D. There is no particular risk to this arrangement.
A. The increased risk of negative equity at some point in the future.
Who has the right of subrogation as a result of a successful claim under a mortgage indemnity guarantee policy in connection with an endowment mortgage? The:
A. Borrower
B. Endowment provider
C. Insurer
D. Lender
C. Insurer
