Redmill Week 3 Flashcards
Is an offer on a property legally binding?
No, an offer on a property is not legally binding, it is an invitation to do business
What is the cheapest type of insurance policy for a capital repayment mortgage
For a capital repayment mortgage, the cheapest type of insurance is a decreasing term assurance equal to the term of the mortgage
What is the cheapest type of insurance policy for an interest only mortgage
For an interest only mortgage a level term insurance policy is the cheapest
If there’s is a mortgage on death, is the estate liable?
Yes, the estate is liable if there is a mortgage debt on death
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?
Yes, the lender can force sale
When is the only time equity builds up on an interest only mortgage
On an interest only mortgage, the only time equity build up is if the property price increases.
How often should reviews be done on an endowment policy?
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.
With a low cost with profit endowment, what happens on death and on maturity?
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.
With a full with profit endowment, what happens on death and maturity?
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.
As pensions cannot be assigned, what will some lenders require if it is used to pay a mortagge?
Some lenders may require a written assurance that the pension will be used to repay the mortgage
On a fixed rate mortgage, what is the relationship between the length of the term and the interest rate?
The longer the term of the fixed rate, the higher the interest rate
If during the term of a fixed rate the borrower changes product or moves property what may they be liable to?
If a borrower moves or changes provider during a fixed rate term, they may be liable for an early repayment charge
What is the benefit of a flexible mortgeg?
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
How will capital be released from the lender to the borrower for a mortgage on a self-build home?
For a self-build home, funds will be released from the lender in stages. Either in arrears or in advance.
How are buy to let mortgages underwritten?
Buy to Let mortgages are underwritten based on the projected rental figures.
How much do lenders expect rental income to be in comparison to the mortgage for buy to let mortgages
Lenders will expect rent to be at least 125% of the mortgage repayments
How does a ljara mortgage operate?
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
How does a Murabha mortgage operate?
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
What is the difference between APR and APRC?
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
What is the annual test method for interest rates?
The interest paid over the 12 months are based on the outstanding balance at the start of the year
What benefits does Mortgage Payment protection Insurance pay?
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
How long after the mortgage is agreed does there need to be before MPPI is sold?
There needs to be a minimum of 7 days between the mortgage being agreed and MPPI being sold
How many times can an income protection policy be claimed on?
An income protection policy can be claimed on as many times as is needed
When is it advisable that buildings insurance should be in place from?
It is advised that building insurance should be in place from the date of exchange
What is a higher lending charge?
A higher lending charge is a charge where there is a higher loan to value on properties
When is a higher lending charge applied?
A higher lending charge is applied where there is a LTV over 75%
When may an APRC2 be used?
An APRC2 may be used when comparing products
When interest rates for a mortgage are calculated on an ‘annual rest method’ what does this mean?
When interest rates are calculated on an ‘annual rest method’ it means that the interest you pay over the 12 months is based on the outstanding balance at the start of the year so is not the true reduced balance. Monthly payments do not reduce the mortgage balance until the start of next year when the calculation is done again.
With the ‘daily rest method’ how is interest calulcated?
This is a fairer way and interest is calculated daily (1/365 of the annual interest is debited based on the outstanding balance on that day)
How long does MPPI pay out for?
MPPI pays out for a maximum of two years should the insured be not able to work due to sickness, accident, disability or redundancy
Is it possible for a provider to cancel MPPI?
Yes a provider can cancel MPPI, subject to a notice period.
How long does there need to be between a mortgage being agreed and a MPPI policy being sold?
There needs to be a minimum of 7 days between the mortgage being sold and the MPPI
When is it advised that a protection policy be put in place when buying a property?
It is advised that a protection policy should come in force at the point in which the contract is legally binding.
What is the cost of reinstatement?
The cost of reinstatement is the cost to rebuild the property and the removal of rubbish.
