Topic 2 & 3 - Mortgage Regulation and Types of Borrower Flashcards
What is a legal charge?
Gives lender rights over a property while the mortgage is outstanding.
Legal charges give lenders security and it means they offer lower rates than say unsecured loans.
What is a first charge?
It is the registered first charge on a property at Land registry and has priority
What is a second charge?
It sits behind the first charge and will be redeemed after the first charge lender has been paid.
It is at a higher interest rate.
List the MCOB Criteria
1 - Mortgage is to individual/s or trustees
2 - Secured by legal charge on UK land
3 - At least 40% of the land is used as a dwelling
4 - Land must by used by borrower or related person; or beneficiary or related person when borrower is a trustee
5 - Majority of residential and commercial mortgages that meet 40% rule are regulated
What mortgages are unregulated?
Commercial mortgages (shops, offices etc…)
Buy to Lets
If borrower is company or LLP
What is meant by the term accidental landlord?
Someone who has inherited a house which is then rented out
Someone who has moved to another property and can’t sell the previous one, so its rented out to cover costs.
Someone who moves into a partner’s property so rents out their property to cover costs.
How is a Mortgage Application assessed?
Person - is lender legally able and willing to lend to the applicant
Purpose - is it acceptable (house purchase, home improvement, capital raising etc…)
Property - is it a suitable security for the required mortgage
What are the types of Borrowers?
Private (personal)
Buy to Let
Corporate
Business
Commercial
Personal representatives and attorneys
Trustees
Other
With a Business Buy to Let what 3 things does Lender need to satisfy?
- If using personal income must carry out affordability assessment
- interest rate affordability stress test
- Interest coverage ratio
When lending to limited companies what is the maximum percentage a building society can hold in loans to a limited company?
25%
What are the two forms Lasting power of Attourney can be set up in?
Property and affairs – covers finance and property
Health and welfare – covers medical treatment and care
