Topic 2 Types Of Borrower Flashcards
What are the 3 P’s of assessing a mortgage application?
- Person
- Purpose
- Property
Which P’s of assessing a mortgage application is the below?
Is the lender able and will to lend to the applicant?
Person
Which P’s of assessing a mortgage application is the below?
Is the purpose of the application acceptable
Purpose
Which P’s of assessing a mortgage application is the below?
Is the property suitable security for the required mortgage
Property
When a lender is considering a mortgage applicant what are these?
- Lenders strategy, market positioning & required business levels in certain sectors
- Applicant risk profile
- Desired profit margins
- Areas & recovery statistics & other circumstances
What is in a lender’s “Lending policy”
What does “Joint & Several Liability” mean?
All parties are liable for mortgage debt not just there share
What are these in relation to mortgage applicants?
- Private (Personal)
- Buy-to-Let
- Business
- Corporate
Types of borrower
What are these in relation to mortgage applicants?
- Commercial
- Personal representatives & attorneys
- Trustees
- Other
Types of borrower
What are the 3 reasons “Private borrowers” seek mortgage finances?
- Family home
- Second charge
- Bridging Finance
What is “Interest Coverage Ratio” in a BTL mortgage?
Level of rental income against payments (including costs and tax)
What is the minimum standard for BTL “Interest Coverage Ratio” set by the PRA?
125%
What is the “Interest rate affordability stress test” in relation to a BTL application?
Lender required stress test on borrower’s ability to repay a mortgage if interest rates rose
How long a period must a lender perform a “Interest rate affordability stress test” over
5 years
What is the minimum interest rate rise a lender must increase a person interest rate when performing an “Interest rate affordability stress test”?
2% (minimum)
What is an “Income Affordability Test” in relation to a BTL application
A detailed affordability test that must be carried out if the borrower is using some personal income to support a mortgage application
What does having “4a permission” in the Consumer Credit Directive mean for CBTL’s?
The form can carry out regulated CBTL activities (if they register with the FCA)
What is the minimum annual income a person must receive to be classed as “High-net-worth”?
- £300,000 minimum annual income
- Minimum net assets of £3 million
What is a “Professional Customer”?
- Customer who has worked in the home finance sector for at least a year
- Firm believes is capable of understanding risks in a mortgage proposal
What does a “Personal representative do”?
Executor of the will of deceased person
Under what circumstances are lenders able to lend to “Personal Representatives”?
- Loan is required to administer an estate
- Purchase property for a dependant of the deceased
In Scotland in relation to executors what is an “executor-nominate”?
Person appointment an executor in a will
In Scotland in relation to executors what is an “executor-dative”?
Executor appointed by a court
What is an “Attorney”?
Somebody given responsibility to deal with another person’s financial affairs
Before lending to a trustee of a trust what should a lender do?
Should check to see where the lender has been given the power to borrow under the trust deed