Topic 3 - Borrowing products

Question 1

What is a repayment mortgage?

Answer 1

A mortgage loan where monthly payments cover both capital and interest so that by the end of the mortgage period, loan has been completely repaid

Question 2

What is an offset mortgage?

Answer 2

A mortgage loan where interest would have been earned on the borrower’s savings and current accounts is set against the interest owing on the mortgage.

Borrower either makes a lower monthly repayment or pays the same for a less amount of years

Question 3

What is interest only mortage?

Answer 3

A mortgage loan where monthly repayments only covers the interest on the whole amount borrowed for the whole mortgage period.

At the end of the mortgage period, the borrower still owes the full amount borrowed and must repay this capital sum in one payment

Question 4

What is loan to value?

Answer 4

The ratio of the size of the loan to the value of the property

Question 5

What is loan to income?

Answer 5

The ratio of the size of the loan to the income of the borrower

Question 6

What is a fixed rate in a mortgage?

Answer 6

A mortgage loan whereby the interest rate is fixed for a stated number of years

Question 7

What is a discounted interest rate on a mortgage?

Answer 7

A variable-rate mortgage that gives the customer a set discount off the providers standard variable rate for an agreed period

Question 8

What is a variable rate on a mortgage?

Answer 8

A mortgage loan where the borrower pays the provider’s basic mortgage rate at the time (also known as standard variable rate SVR)

Question 9

What is a standard variable rate on a mortgage?

Answer 9

A provider’s basic rate

Question 10

What is a tracker on a mortgage?

Answer 10

A common form of variable rate mortgage whereby the interest rate charged tracks changes in some other specific interest rate

Question 11

What is a buy to let mortgage?

Answer 11

A long term secured loan taken out by a person who is buying a property with the intention of letting it to tenants

Question 12

What is the Ijara home purchase plan?

Answer 12

A form of islamic home purchase plan where the provoder buys the clients selected property and then sells the property to the client for the same price under a promise to purchase agreement, with repayment spread over a term of up to 25 years.