Redmill Week 3 Flashcards
How does the FCA regard the risk of equity release?
The FCA regards equity release as having ‘high regulatory risk’
Unless through ‘execution only’ - the only route to equity release is through advice. Who is execution only available to?
Execution only is available to high net worth individuals, professionals and those who have rejected advice.
Its best practice for who to complete paperwork? Adviser or customer?
The customer
If a customer has a pessimistic view on life expectancy, is a home reversion plan likely to be suitable?
No it is unlikely to be suitable
Where does the most complaints around equity release come from?
The family
Why may a minimum inheritance guarantee be considered?
To protect a percentage of the property value should death occur in the early years.
Does the customer have the right to choose their own solicitor or must they go with an appointed one?
They have the right to choose their own
when should a solicitor offer a ‘certificate’ to a customer?
After explaining the rights and obligations of an equity release contract to show that everything has been explained and understood.
Taking which type of equity release product may result in the customer becoming a ‘tenant in common’?
A home reversion policy
What does ‘conditions subsequent’ mean?
This means events that lead to the loan to fall due (death, sale, entering LTC)
How are the contracts structured for a home reversion plan?
Under a home reversion plan there are two types of contract, one for the sale of all/part of the property and then a second contract for the lease allowing the tenant to stay in the property for life.
Are second charges on a lifetime mortgage regulated and when are they paid?
They are regulated and will be paid after the first charge.
What affect may rising interest rates have on home reversion plans?
Rising interest rates can reduce the value of the property or slow the rate of increase. Due to supply and demand pressures
Which type of equity release plan is the most flexible?
Lifetime mortgages are more flexible
Under a lifetime mortgage, how long does an individuals representatives have to sell the property before the bank starts looking into it?
1 year
Does a complaint have to be valid?
A complaint does not have to be valid
On death of a customer with a home reversion plan, who is responsible for the sale?
Under a home reversion plan, the provider will sell the property, even f they only have a minority shareholding in the property.
Who qualifies as an eligible complainant?
- An individual
- Small business with less than 10 staff and a balance sheet or turnover with less than EUR2m
- Charity with annual income less than £6.5m or a trust with less than £5m assets
When should customers be sent acknowledgement of a complaint?
Within a ‘reasonable timeframe’
When should a customer receive the right to go to the FOS?
After 8 weeks
When should a referral to the FOS be made within?
o 6 months of receipt the right to go to the FOS
o 6 years of the event in question or 3 years of coming aware of the event (if this is later)
Who are FOS decisions legally binding on?
They are legally binding on the provider but not the complainant.
How much can the FOS make a legally binding payment of resolution on?
£415,000 plus
Interest, plus
Costs, plus
Interest on costs
How is the FSCS funded?
By levies
How much protection does the FSCS provide on mortgages?
100% of £85,000
Must an equity release customer get consent from the provider before making alterations to the home?
yes
True or false, stamp duty land tax is due on a home reversion plan?
True, as it involves conveyancing of the property
