Topic 16,17&18 Flashcards
Which one of the following statements regarding interest payments on a repayment mortgage is TRUE?
A. The first year’s payments will be made up of mainly interest and then progressively become a greater proportion of capital.
B. The first year’s payments will be made up of mainly capital and then progressively become a greater proportion of interest.
C. The capital and interest elements remain constant throughout the term.
D. All of the payment is interest on a repayment mortgage.
A. The first year’s payments will be made up of mainly interest and then progressively become a greater proportion of capital.
A possible drawback of a capital and interest mortgage is that it:
A. cannot be topped up.
B. is always more expensive than other methods.
C. may not fully repay loan.
D. requires additional life assurance.
D. requires additional life assurance.
Which of the following guarantees to repay the loan at maturity?
A. ISA
B. Personal Pension
C. Full Endowment
D. Low-Cost Endowment
C. Full Endowment
In the case of arrears, which one of the following schemes allows for the term of the mortgage to be extended?
A. With-profits endowment mortgage
B. Low-cost endowment mortgage
C. Low start endowment mortgage
D. Repayment mortgage
D. Repayment mortgage
Fred’s premium on his low-cost endowment increased by £20 because:
A. he chose a low start plan.
B. bonus levels reduced.
C. his health deteriorated.
D. of the withdrawal of MIRAS.
A. he chose a low start plan.
The MINIMUM guaranteed maturity value of a unit-linked endowment policy is:
A. the basic sum assured.
B. 75% of total premiums paid.
C. the total of premiums paid.
D. not specified.
D. not specified.
A higher rate taxpayer can receive tax relief overall on his pension mortgage contributions at:
A. 10%
B. 20%
C. 22%
D. 40%
D. 40%
Some borrowers like to feel that the amount they owe to the lender is being reduced by their monthly mortgage payments. They should choose a:
A. fixed rate mortgage.
B. endowment mortgage.
C. repayment mortgage.
D. ISA mortgage.
C. repayment mortgage.
low-cost endowment is usually a combination of which of the following types of assurance?
A. With-profit endowment and level term assurance.
B. Without-profit endowment and level term assurance.
C. With-profit endowment and decreasing term assurance.
D. With-profit endowment and increasing term assurance.
C. With-profit endowment and decreasing term assurance.
Which one of the following is FALSE with regard to ISA mortgages?
A. Separate life assurance may be necessary.
B. Only UK residents (for tax purposes) are eligible.
C. All income and growth is tax free in the hands of the investor.
D. The maximum regular monthly payment is £2,000 per month.
D. The maximum regular monthly payment is £2,000 per month.
The MAXIMUM tax-free cash sum that can be taken from a personal pension fund of £300,000 to repay an interest only mortgage is:
A. £60,000
B. £75,000
C. £100,000
D. £150,000
B. £75,000
Which of these statements is INCORRECT in relation to an ISA?
A. The maximum contribution per tax year is £20,000.
B. Joint ISAs can now be taken under the new rules.
C. Growth of the fund is tax free in the hands of the investor.
D. Dividends paid into an ISA are paid without deduction of income tax.
B. Joint ISAs can now be taken under the new rules.
Which interest accounting methodology fails to penalise late payers of their monthly payments?
A. Annual review system
B. Annual rest system
C. Daily interest
D. Fixed payments
B. Annual rest system
Jason would like to arrange a pension mortgage and has yet to start any pension arrangements. Based on his income of £28,000, what is the maximum in total that can be paid into a personal pension this tax year to receive tax relief?
A. £3,600
B. £28,000
C. £215,000
D. £1,500,000
B. £28,000
Alison is looking for an interest payment method that will benefit her if she makes some of her payments early. She should choose:
A. fixed payments.
B. annual rest.
C. daily interest.
D. annual review.
C. daily interest.
John has a 20-year repayment mortgage for £75,000 on an annual rest basis. If the interest rate is fixed at 6% for the first 12 months and the monthly repayments are £547.50, how much capital will he repay in the first year?
A. £1,090
B. £1,640
C. £1,900
D. £2,070
D. £2,070
Tom and Mary have an interest-only mortgage with a low-cost with- profits endowment policy as the repayment vehicle. Which of the following statements in respect of the policy is correct?
A. Annual reversionary bonuses and a final terminal bonus may be added to the basic sum assured, but these are not guaranteed.
B. Annual reversionary bonuses and a terminal bonus may be added to the guaranteed death benefit, but these are not guaranteed.
C. Annual reversionary bonuses will be added to the basic sum assured, and these are guaranteed.
D. Annual reversionary bonuses may be added to the guaranteed death benefit, but these are not guaranteed.
A. Annual reversionary bonuses and a final terminal bonus may be added to the basic sum assured, but these are not guaranteed.
Colin, aged 45, is paying £100 per month to the cash element of an ISA in this tax year. He is considering an ISA linked interest-only mortgage. What is the maximum additional amount he can pay into the ISA this tax year?
A. £18,800
B. £20,000
C. £3,600
D. Nil
A. £18,800
What are the rates of growth permitted by the FCA for illustrations of the projected benefits from a unit-linked endowment when used to repay an interest only mortgage?
A. 4%, 6% and 8%
B. 5%, 6% and 7%
C. 5%, 7% and 9%
D. 6%, 7% and 8%
A. 4%, 6% and 8%
The amount available to repay an interest only mortgage from a unit- linked investment depends on the price of the units on the repayment date. The price at which the units are cashed in is known as the:
A. bid price.
B. cash price.
C. offer price.
D. reserve price.
A. bid price.
Which of the following statements about a personal pension plan is correct?
A. At retirement the pension provides an income that is free of income tax under current
legislation.
B. A maximum of 20% of the fund value can be taken as a tax-free lump sum on retirement.
C. Tax relief can be claimed on contributions to the plan.
D. The lump sum and pension benefit can be taken at any time provided contributions have been made for at least ten years.
C. Tax relief can be claimed on contributions to the plan.
Which of the following statements in respect of a 20-year repayment mortgage is correct?
A. The capital element will not reduce during the first 5 years of the mortgage term.
B. Monthly payments decrease as the capital element decreases over the term.
C. The interest element of the monthly payment gradually reduces throughout the term.
D. The interest element of the monthly payment remains constant throughout the term.
C. The interest element of the monthly payment gradually reduces throughout the term.
Which of the following would provide a borrower with a high degree of certainty that the loan will be repaid in full by the end of the mortgage term, together with a cheap form of life assurance?
A. A full with-profits endowment policy.
B. A low-start low-cost endowment policy.
C. An interest-only mortgage with level term assurance.
D. A capital repayment mortgage with decreasing term assurance.
D. A capital repayment mortgage with decreasing term assurance.
Which of the following is a benefit of using a unit-linked endowment policy in conjunction with an interest-only mortgage?
A. It is ideally suited to the low-risk customer.
B. The units can be cashed in at any time making it possible to repay the mortgage early.
C. Reversionary bonuses are normally credited to the policy each year.
D. This type of policy will always have a fixed maturity date.
B. The units can be cashed in at any time making it possible to repay the mortgage early.
Which of the following is EXCLUDED by a lender when calculating the annual percentage rate of charge (APRC)?
A. Mortgage indemnity guarantee premiums
B. Mortgage valuation fees
C. Arrangement fees
D. Associated life assurance premiums
D. Associated life assurance premiums
