Topic 10 - Assessing the Applicant's Financial Status

Question 1

What types of income are taken into account?

Answer 1

• Employment
• Self-employment
• Directorship
• Secure trust income
• Other secure income

Question 2

Suitable documents for evidencing income:

Answer 2

• Payslip
• Bonuses
• Self-assessment taxation calculation

If these aren’t available, an employer’s reference may be acceptable

Question 3

How is income from self-employment assessed?

Answer 3

HMRC tax calculations produced from the individual’s self assessment

OR

Accountant’s certificate

OR

Full business accounts for the past 3 years

Question 4

What comprises a director’s pay?

Answer 4

• Salary
• Dividends
• Director’s Loan

Question 5

If a director’s loan is not repaid within nine months of the end of the company accounting period, the company will have to pay a tax charge of how much?

Answer 5

32.5%

Question 6

A director’s loan below how much could be interest-free?

Answer 6

£10000

Question 7

What expenditure must be deducted to calculate free disposable income?

Answer 7

• Committed expenditure: contractual agreements
• Basic essential expenditure: food, bills
• Basic quality-of-life expenditure: clothing, household, basic recreation, childcare, etc.

Question 8

Where the mortgage is for debt consolidation, the firm must also take into account:

Answer 8

• Costs incurred by increasing the term
• Whether it is appropriate to secure previously unsecured debts
• If the customer is known to have payment issues, whether negotiating an arrangement with their creditors would be more appropriate than consolidating through a mortgage

Question 9

A credit-impaired customer is one who:

Answer 9

• Has owed the equivalent of 3 months payments on a mortgage or other loan within the last 2 years
• Has had one or more county court judgements in the last 3 years
• Has had an IVA or bankruptcy order in force within the last 3 years

Question 10

All sole traders must provide a detailed breakdown of their business expenditure on their tax return. True or false?

Answer 10

False. Only if they’re over the VAT threshold

Question 11

To comply with MCOB 11, lenders must retain documents that provide a rationale for the decisions taken on mortgage applications for how long?

Answer 11

For the length of the mortgage contract in hard copy or electronic form.