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CF6 - Mortgage Advice > Redmill Week 1 > Flashcards

Redmill Week 1 Flashcards

1
Q

Define the Prudential Regulation Authority

A

The Prudential Regulation Authority is a limited company owned by the Bank of England and ran by the Prudential Regulation Committee.

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2
Q

What are the two statutory objectives of the PRA?

A
  • To promote safety and financial soundness of firms they regulate.
  • For insurance companies, to secure an ‘appropriate level’ of protection for policy holders and to minimize the impact on stability if the insurer fails.
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3
Q

What is the secondary objective of the PRA?

A

To facilitate effective competition.

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4
Q

What is the Financial Policy Committee?

A

The Financial Policy Committee is a macro-level committee that are tasked with spotting emerging risks in attempt to reduce/remove systematic risk.

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5
Q

What is ‘Onshoring’

A

Onshoring is where EU regulations were made UK law

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6
Q

What does the FCA cover?

A

The FCA covers sales and marketing of all firms and prudential regulation of smaller firms.

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7
Q

How is the FCA financed?

A

The FCA is financed by a levy on all regulated firms.

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8
Q

What is the one strategic objective of the FCA?

A

The strategic objective of the FCA is to ensure that markets function well.

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9
Q

PEP

What are the three operational objectives of the FCA?

A

The three operational objectives of the FCA is:
- Protection of customers.
- Ensuring the integrity of the UK financial markets.
- Promoting competition.

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10
Q

The FCA does not regulate buy-to-let mortgages, what is the only situation where they will?

A

The FCA only regulates buy-to-let where it is a consumer buy-to-let and the individual became a landlord accidentally.

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11
Q

Who is exempt from direct FCA authorisation?

A

The Bank of England, Local Authorities, the European Central Bank and Appointed Representatives are exempt.

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12
Q

How often does the Senior Management and Certification Regime need to be reassessed by firms?

A

The SM&CR needs to be reassessed on an annual basis by firms.

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13
Q

Who does the Rules of Conduct apply to?

A

The rules of conduct applies to everyone else.

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14
Q

When did the changes come into place from the Mortgage Market Review?

A

26th April 2014

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15
Q

Which were the 5 main changes following the Mortgage Market Review in 2014

A

The main changes following the MMR was:
- The onus of assessing affordability fell on the lender.
- Non-advised sales were no longer permitted unless a HNWI or home finance professional
- Vulnerable customers had to have advice
- Lenders must provide key information before contract is completed.
- All advisers must hold a relevant mortgage qualification

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16
Q

What are the conditions for a mortgage to be a regulated contract under MCOB?

A

TI be a regulated mortgage under MCOB:
- A loan must be provided from lender to borrower
- Must be secured against land in the European Economic Area (EEA)
- At least 40% of the land must be used or intended to be used by the borrower or a related person
- Mortgage must not be a home purchase plan, limited payment, second charge or bridging loan.

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17
Q

What type of morgages are not regulated?

A

Buy-to-let mortgages and loans to a company or a loan for commercial property are not regulated by MCOBs.

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18
Q

In which situations are execution only mortgages available:

A

An execution only mortgage is available where:
- Not possible or practical to provide advice
- One is a high-net-worth individual
Customer is a mortgage professional holding their position for at least a year
- A customer rejects advice

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19
Q

What would classify one as a High-net-worth-individual from a mortgages standpoint?

A

Someone with an annual net income of no less than £300,000 or net assets of no less than £3million

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20
Q

Who is the ‘mortgagor’?

A

The mortgagor is the borrower

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21
Q

Who is the ‘mortgagee’?

A

The mortgagee is the lender

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22
Q

What is the order of the two transfers of rights in relation to a mortgage

A

From the seller to the buyer, then the buyer to the lender

23
Q

What needs to be in place for a mortgage to have legal standing

A

For a mortgage to have legal standing, it must:
- Be in writing
- Signed and dated
- Witnessed
- Sealed

24
Q

How long is a cooling off period on a mortage?

A

There is no cooling off period on a mortgage

25
Q

What does the term discharged mean?

A

Discharges means that the mortgage has been paid off and ended

26
Q

In which three ways can a mortgage be discharged?

A

A mortgage can be discharged by:
- An agreement to end the mortgage and replace with a new one (remortgage)
- The borrower has paid in full
- The borrower breaches the terms of the contract and the lender has to take legal action to seek what is owed

27
Q

What is equity redemption?

A

Equity redemption is the right to repay your mortgage at any time

28
Q

What type of mortgages are early repayment charges always a part of?

A

Early repayment charges are always part of a fixed rate mortgage

29
Q

What is a supported and unsupported guarantee?

A

A supported guarantee involves the offering as a security as collateral of the guarantor. Whereas, unsupported does not involve security, just a promise to pay

30
Q

Who owns all land in the UK?

A

The Crown owns all of the land in the UK

31
Q

Which type of property ownership is the highest form of ownership?

A

Freehold is the highest form of home ownership

32
Q

What requirements need to be in place for a leaseholder to buy the freehold?

A

To buy the freehold:
- At least one half of qualifying tenants agree to the purchase
- The lease must be a long lease of 21 years or more
- Tennant must have lived in the property for at least 2 or more years

33
Q

What is the relationship between commercial property and interest rates?

A

There is an inverse relationship between commercial property and interest rates. If interest rates increase, prices decrease

34
Q

Which is more volatile and less liquid, Commercial property or residential property?

A

Commercial property is both less liquid and more volatile

35
Q

What type of policy is the controlling of interest rates to manipulate inflation?

A

Controlling interest rates is a form of monetary policy

36
Q

What type of policy is the controlling of taxation and government spending to control inflation?

A

The controlling of taxation and government spending is called fiscal policy

37
Q

What is ‘fiscal drag’?

A

Fiscal drag is where income from taxation increases without increasing tax rates

38
Q

What is a second mortgage/second charge?

A

A second mortgage/charge is a loan secured on the property with another provider than the original lender

39
Q

What are the requirements as a result of the Mortgage Credit Directive on second mortgages?

A
  • They must have appropriate permissions to arrange
  • Details of the product mist be clearly presented and explained
  • A European Standardised Information Sheet must be provided to the customer
  • There must be a 7 day reflection period
  • Affordability checks must be carried out by the lender
40
Q

Can a limited company enter into a mortgage contrcat?

A

Yes, a limited company can enter a mortgage contract

41
Q

What is a Special Purpose Vehicle (SPV)

A

A special purpose vehicle is a limited company that is set up to hold property and not perform any other activity

42
Q

How much discount do you get under the right to buy scheme for between 3 to 5 years residency

A

For a 3-5 year residency, you will get a 35% discount under the right to buy scheme

43
Q

How much of a discount do you get with the help to buy scheme if you have a 5 year + residency?

A

You will get a 1% increase each year on top of the 35%

44
Q

DO you have to have been a resident in the same council home to qualify for the Right to Buy sheme?

A

No you do not need to be resident of the same home for the period of time

45
Q

What is ‘staircasing’?

A

Staircasing relates to shared ownership where you can buy additional shares of the property up to 100%

46
Q

What is the maximum household income for shared ownership?

A

The maximum household income for shared ownership is £80,000 outside London and £90,000 inside London

47
Q

What is the maximum value of a property for a Help to Buy Equity Loan?

A

The maximum property value for a help to buy equity loan is £600,000

48
Q

How long is it before a home equity loan becomes payable?

A

A home equity loan is not repaid for the first 5 years

49
Q

What is the maximum monthly contribution for a Help to Buy ISA?

A

The maximum monthly contribution for a help to buy ISA is £200

50
Q

Can help to buy ISAs be Stocks and Shares as well as Cash?

A

No, help to buy ISAs are cash only

51
Q

What is the maximum property value for a help to buy ISA?

A

For a help to buy ISA, the maximum property value is £450,000 inside London and £250,000 outside London

52
Q

What is the oldest age you can open a Lifetime ISA

A

The oldest age you can open a Lifetime ISA is age 39

53
Q

When does the LISA bonus stop being paid?

A

The LISA bonus stops at age 50

54
Q

How many years of accounts do lenders require for self employed?

A

Lenders usually require 3 years accounts for those who are self employed

CF6 - Mortgage Advice (2 decks)

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