TOPIC 13 - Secured and unsecured lending Flashcards
Which of the following is incorrect for a discounted-rate mortgage?
a) The payable rate is directly linked to the Bank of England base rate.
b) The discount is from the lender’s standard variable rate.
c) The monthly mortgage payment can vary.
d) There is usually a penalty if the loan is repaid before a specified date.
a) The payable rate is directly linked to the Bank of England base rate.
What type of mortgage product interest rate can vary, but cannot rise above a pre-set limit?
a) Capped rate.
b) Base-rate tracker.
c) Discounted rate.
d) Fixed rate.
a) Capped rate.
Which of the following is true in relation to credit cards?
a) Credit card interest rates are higher than most other forms of borrowing.
b) The whole balance must be repaid each month, usually within 25 days of a statement.
c) Credit card companies make a small payment to the retailer for each transaction.
d) No additional charges apply to overseas credit card transactions.
a) Credit card interest rates are higher than most other forms of borrowing.
eff and Alison have just bought a flat with a mortgage, but will also be required to pay rent to a housing association. This arrangement is referred to as:
a) equity release.
b) shared ownership.
c) home reversion.
d) equity share.
b) shared ownership.
Equity release is regulated by:
a) the Financial Conduct Authority and the Equity Release Council.
b) the Prudential Regulation Authority only.
c) the Equity Release Council only.
d) the Financial Conduct Authority only.
d) the Financial Conduct Authority only.
Barbara, aged 70, has heard she can use her property to provide some extra cash as and when she needs it. She would like to leave as much of the property’s value to her two children as possible. Which arrangement would best satisfy her needs?
a) A home income plan.
b) A lifetime mortgage.
c) A drawdown lifetime mortgage.
d) A home reversion plan.
c) A drawdown lifetime mortgage.
Brendon’s lender charged him a fee for an insurance policy because his new mortgage was more than a specified percentage of the property value. It is incorrect to say that:
a) Brendon will have no further liability if a claim is made on the policy.
b) Brendon’s mortgage will be more than 75-80% of the property value.
c) In the event of Brendon defaulting, the policy only protects the lender.
d) The fee could be added to Brendon’s mortgage.
a) Brendon will have no further liability if a claim is made on the policy.
Second charge loans:
a) do not require equity in the property.
b) are regulated under the Consumer Credit Act 2006.
c) are charged at a higher rate than first charge loans.
d) become part of the existing mortgage.
c) are charged at a higher rate than first charge loans.
Secured lending can only be arranged on land or property.
a) True b) False
b) False. Although property is the most common asset used, borrowing can be secured on a range of assets.
In relation to bridging finance:
a) closed bridging has a feasible repayment strategy.
b) closed bridging interest rates are higher than for open bridging.
c) open bridging is arranged on a long-term basis.
d) open bridging is less risky for the lender than closed bridging.
a) closed bridging has a feasible repayment strategy.
Define a) a mortgagor and b) a mortgagee.
Mortgagor is the borrower
Mortgagee is the lender
Which of the following is not true in relation to a repayment
mortgage?
a) The higher the interest rate, the higher the monthly
repayment to the lender.
b) Life cover is built in.
c) The loan is guaranteed to be fully repaid at the end of the
term, providing monthly repayments are maintained.
d) At the beginning of the term most of the monthly repayment
is paying interest on the loan.
b) Life cover is built in.
For what reason might an ISA not be suitable for someone who is arranging an interest only mortgage of £300,000 over a five year term?
An ISA has an annual investment limit which might make it difficult to
fund a large mortgage and/or one arranged over a short term.
It is not the responsibility of the lender to ensure that a
borrower has a repayment vehicle in place for an interest only
mortgage. True or false?
False
Chris is 53 and is pleased to see from his annual personal pension statement that his pension pot has grown enough to enable him to take a tax free lump sum and pay off his interest only mortgage. Will this be possible?
Not yet, because Chris cannot access his pension funds until he is at least 55.
