Topic 3: Mortgage processing and Borrowing Flashcards
What costs are involved with mortgages
Survey Legal fees Stamp duty Application fee Insurance Furnishing costs The actual mortgage
What is stamp duty?
A tax that is levied onto property over the value of £125,00
What is LTI
Loan to Income
When a bank gives out a mortgage they work out the ratio of the size of the loan to the size of the income of the customer.
What is the LTI ratio
Basic salary + extra income - credit commitments
What is LTV
Loan to Value
The ratio of the size of the loan to the value of the property
How long is the typical mortgage period
25 years
Ways to repay a mortgage?
Repayment - Monthly spilt of capital and interest
Interest-only - Pay monthly income and the capital outright at the end
What 4 ways can interest be charged on a mortgage
Fixed - rate: Doesn’t change
Variable rate: Changes based upon the bank rate
Offset: Savings are used to reduce the amount of interest paid
Loyalty mortgage: Cheaper for loyal customers
Islamic Home Finance - what’s this
Ijara method - Pay for house + rent (no interest)
What’s loan forbearance
A repayment holiday in which you don’t pay back the loan for a while (must be valid)
What’s a help to buy equity loan?
Purchaser - 5%
Lender - 75%
Government - 20% (They own part of it)
What’s a shared ownership scheme?
Pay for part of the house and rent the rest the owe
What’s a newbuy house
The purchaser puts down a 5% deposit
What’s a buy-to-let mortgage
Owner becomes a landlord and rents it out. Must have a valid tenancy agreement
What’s hire purchase?
Renting something, return at any time.
What’s personal contract purchase?
A car hire purchase
When does a person have to repay a student loan?
Once they’ve finished studying
Once they earn over £21,000 a year
Stop after 30 years
What is life insurance?
also known as life cover or life assurance is a way to help protect your loved ones financially if you were to die during the length of your policy
What is PPI and what happened?
Payment protection insurance
Payment protection insurance (PPI) is the insurance sold alongside credit cards, loans and other finance agreements to insure payments are made if the borrower is unable to make them due to sickness or unemployment.
However, the small print made it invalid for some users and they’ve had to pay out $23bn compensation
