Redmill Week 4 Flashcards
Give 3 ways in which someone may be vulnerable?
Someone may be vulnerable due to:
- Physical health
- Education
- Age
- Life events (Divorce/bereavement)
- Learning difficulties
- High debt
What is the aim of a discounted rate?
A discounted rate is used to incentivize variable rate borrowing
Who does a discounted rate appeal to?
A discounted rate appeals to first time buyers usually.
What happens at the end of a fixed rate term?
At the end of a fixed rate term, it reverts back to the SVR or higher
Who may a flexible mortgage be suitable for?
A flexible mortgage may be suitable for someone who does not have a set income - such as self-employed or those who receive commissions.
A flexible mortgage could also be good for someone looking to repay their mortgage off quicker
Who could an offset mortgage be suitable for?
An offset mortgage could be suitable for those with a few accounts with the same provider - The balances offset the interest.
Who could a current account mortgage be suitable for?
A current account mortgage may be suitable for those who don’t mind having one account with a very large overdraft with everything running out of the one account
What are your options once the fixed rate period ends?
Once the fixed rate period ends, you could either:
- Choose to stay on the SVR
- Look for a better deal with the same lender
- Shop around and look for a better deal with another lender
Which one requires a further assessment of affordability? Drawdown or further advance?
Further advances require further assessment of affordability
What is tacking?
Tacking is where the original lender adds a further advance to the original mortgage and combining the two.
What is the difference between Closed Bridging and Open Bridging? In relation to bridging loans.
Closed bridging is where the property has sold and the contracts are binding, however open bridging is where there is no binding contract therefore riskier to both lender and borrower.
Why may someone switch from interest only to capital repayment?
One may switch from interest only to capital repayment if:
- Want to cash in investment which is being used as the repayment vehicle
- May be in financial difficulty
- Want to make overpaymnets
- May not be happy with performance of the investment product and want peace of mind that the mortgage will be paid
- Improvement of financial circumstances
Why may someone switch from capital repayment to interest only mortgages?
They may switch if they are in financial difficulty and want to reduce their payments
What is transfer of equity?
Transfer of equity is removing someone from the mortgage and can only be done if both parties agree
Is SDLT due on transfer of equity if they are married?
If married, there is no SDLT due on transfer of equity
Is there SDLT due on transfer of equity if not married?
Yes SDLT could be payable on transfer of equity if not married
What is equity of redemption?
Equity of redemption is ones right to repay the mortgage early
What % by value of creditors need to agree for an IVA to be binding
75% of creditors by value need to agree for an IVA
What is the usual timeframe for bancrupcy?
Bankruptcy usually lasts one year but can be extended up to 5 years
Are debt obligations ended at the end of bankruptcy even if all debts are not paid?
Yes debt obligations end at the end of bankruptcy even if all debt is not paid
How long do records in relation to mortgage arrears need to be kept for?
Records relating to mortgage arrears need to be kept for at least 3 years after the arrears have been paid
On a regulated mortgage, when a customer falls into arrears, how soon does a warning need to be sent to the customer?
When falling into arrears, a customer should be sent a warning as soon as possible but always within 15 working days of the lender becoming aware.
What does ‘capitalising arrears’ mean?
Capitalising arrears is allowing the customer to add the arrears as a lump sum to the loan on property.
What is ‘mortgage rescue’?
Mortgage rescue is where a customer sells part of the property to a housing association for a lump sum to pay the arrears on the mortgage
Which is higher? The initial fixed rate or the SVR?
The SVR tends to be higher than the initial fixed rate
Which type of additional finance does not need further application processes?
A draw down facility does not need a further application process.
What is the main pro and con of a draw down facility?
A draw down facility does not need additional applications and it tends to have a lower interest rates than a further advance although as it is added to the mortgage the individual may pay more over the longer term.
If an individual has a second charge on their property, and they want to tack on a further advance can the second lender refuse this?
Yes the second lender may refuse this.
Which type of mortgage is not able to be portable?
A home reversion plan cannot be portable as it involves the sale of all or part of the home
What is a debt managementA programme?
A debt management programme is an informal agreement with lenders to repay the debt over a longer period, reducing monthly payments.
What is an IVA?
An individual voluntary agreement (IVA) is a formal agreement where a monthly amount is set over a period of years where the borrower will repay their lenders
What does the term capitalising arrears mean?
Capitalising arrears simply means adding on the arrears as a lump sum to the mortgage.
