Redmill Week 3

Question 1

Is an offer on a property legally binding?

Answer 1

No, an offer on a property is not legally binding, it is an invitation to do business

Question 2

What is the cheapest type of insurance policy for a capital repayment mortgage

Answer 2

For a capital repayment mortgage, the cheapest type of insurance is a decreasing term assurance equal to the term of the mortgage

Question 3

What is the cheapest type of insurance policy for an interest only mortgage

Answer 3

For an interest only mortgage a level term insurance policy is the cheapest

Question 4

If there’s is a mortgage on death, is the estate liable?

Answer 4

Yes, the estate is liable if there is a mortgage debt on death

Question 5

If the estate does not have sufficient money to pay the debt or if there was no life insurance, can the lender force sale if it was owned as tenants in common?

Answer 5

Yes, the lender can force sale

Question 6

When is the only time equity builds up on an interest only mortgage

Answer 6

On an interest only mortgage, the only time equity build up is if the property price increases.

Question 7

How often should reviews be done on an endowment policy?

Answer 7

Reviews should be done at least halfway through the term, 10 years from inception or before maturity, whichever is sooner.

After that, every 5 years and in the last 5 years of the mortgage.

Question 8

With a low cost with profit endowment, what happens on death and on maturity?

Answer 8

With a low cost with profit endowment, on death there is a guarantee to pay off the mortgage is they die within the term. However, on maturity, there can be a shortfall as it pays out the value of the policy.

Question 9

With a full with profit endowment, what happens on death and maturity?

Answer 9

With a full with profit endowment, on death there is a chance of a surplus and insurance is provided that guarantees the amount will be paid. However, on maturity there’s is no guaranteed payment meaning that there may be a shortfall.

Question 10

As pensions cannot be assigned, what will some lenders require if it is used to pay a mortagge?

Answer 10

Some lenders may require a written assurance that the pension will be used to repay the mortgage

Question 11

On a fixed rate mortgage, what is the relationship between the length of the term and the interest rate?

Answer 11

The longer the term of the fixed rate, the higher the interest rate

Question 12

If during the term of a fixed rate the borrower changes product or moves property what may they be liable to?

Answer 12

If a borrower moves or changes provider during a fixed rate term, they may be liable for an early repayment charge

Question 13

What is the benefit of a flexible mortgeg?

Answer 13

The benefit of a flexible mortgage is that the borrower may be able to take a repayment holiday, take further advance or be able to make overpayments

Question 14

How will capital be released from the lender to the borrower for a mortgage on a self-build home?

Answer 14

For a self-build home, funds will be released from the lender in stages. Either in arrears or in advance.

Question 15

How are buy to let mortgages underwritten?

Answer 15

Buy to Let mortgages are underwritten based on the projected rental figures.

Question 16

How much do lenders expect rental income to be in comparison to the mortgage for buy to let mortgages

Answer 16

Lenders will expect rent to be at least 125% of the mortgage repayments

Question 17

How does a ljara mortgage operate?

Answer 17

The property is purchased and owned by the bank and then leased to a customer who makes lease payments - part of this payment buys the property, part is rent

Question 18

How does a Murabha mortgage operate?

Answer 18

The bank purchases a property and sells it back to the client at a higher price which is paid over a term of up to 15 years with fixed payments

Question 19

What is the difference between APR and APRC?

Answer 19

APR is the interest rate for personal loans, whereas the APRC only relates to mortgages and second charges and factors in all the charges, expenses and discounts

Question 20

What is the annual test method for interest rates?

Answer 20

The interest paid over the 12 months are based on the outstanding balance at the start of the year

Question 21

What benefits does Mortgage Payment protection Insurance pay?

Answer 21

MPPI pays out a monthly income equal to the mortgage payments for a maximum of 2 years if the insured is unable to work due to sickness accident, disability or redundancy

Question 22

How long after the mortgage is agreed does there need to be before MPPI is sold?

Answer 22

There needs to be a minimum of 7 days between the mortgage being agreed and MPPI being sold

Question 23

How many times can an income protection policy be claimed on?

Answer 23

An income protection policy can be claimed on as many times as is needed

Question 24

When is it advisable that buildings insurance should be in place from?

Answer 24

It is advised that building insurance should be in place from the date of exchange

Question 25

What is a higher lending charge?

Answer 25

A higher lending charge is a charge where there is a higher loan to value on properties

Question 26

When is a higher lending charge applied?

Answer 26

A higher lending charge is applied where there is a LTV over 75%