U4: T15 - OTHER FACTORS THAT AFFECT THE LENDING DECISION

Question 1

Which of the following would not be deemed a ‘permitted development’?

a) A loft extension of 40m3.
b) Internal conversion of a garage.
c) A two‐storey extension 2m deep.
d) A barn conversion.

Answer 1

d) A barn conversion.

Question 2

Which of the following would be exempt from building regulations?

a) A 25m3 extension.
b) Cavity wall insulation.
c) A detached garage with a floor area of 20m3.
d) A loft conversion.

Answer 2

c) A detached garage with a floor area of 20m2.

Question 3

Local authorities generally give retrospective planning consent if all their requirements have been met. True or false?

Answer 3

False: there is a strong chance that local authorities will not grant retrospective planning consent. Taking down an ‘illegal’ extension can reduce a property’s value, so lenders require confirmation that all the relevant permissions have been obtained.

Question 4

Converting an attached garage internally to create a living room of the same size would not usually require planning consent. True or false?

Answer 4

True: as long as the building is not increased in size, converting a garage internally will not usually require planning consent.

Question 5

A rent‐a‐roof scheme contract for solar panels is automatically terminated if the property is sold. True or false?

Answer 5

False: the scheme continues for the length of the contract, regardless of a change of ownership of the property.

Question 6

Local authority searches generate a non‐refundable charge before exchange of contracts. True or false?

Answer 6

True

Question 7

Glen owns a third share in a buy‐to‐let flat, valued at £100,000, which he intends to keep. He is now buying a house for his family. Glen would not have to pay 3 per cent stamp duty land tax surplus on his new purchase. True or false?

Answer 7

True: as the value of Glen’s share in the buy‐to‐let flat is below £40,000, it would not be treated as a ‘major interest’ which means the surcharge would not apply.

Question 8

Vicky’s property purchase fell through just before exchange of contracts. She had already incurred a number of fees and charges.

Which of the following fees could be carried forward to a new property purchase?
a) Solicitor’s fees.
b) Local authority search. c) Environmental search. d) Land Registry search.

Answer 8

a) Solicitor’s fees.

Question 9

Clive is joint owner of his family home worth £300,000 in England, and is planning to buy a half share in a buy‐to‐let studio flat, valued at £78,000. Would he have to pay the SDLT surcharge on his share of the studio?

Answer 9

c) Yes. Remember that on buy‐to‐let and second homes, the nil‐rate band only applies to purchases below £40,000. On properties costing £40,000 and above, SDLT is payable at 3 per cent over and above the standard rate applying to the purchase price.

Question 10

Joe is buying seven buy‐to‐let flats in one transaction. He can choose to pay SDLT at the commercial property rate. True or false?

Answer 10

True, but he cannot also use multiple property relief.

Question 11

Define Designated Land.

Answer 11

Areas such as conservation areas, areas of outstanding natural beauty, national parks and World Heritage sites.

Question 12

You can apply via permitted development if the addition and previous additions, including outbuildings, do not cover more than half the area of land around the original house. True or false

Answer 12

True

Question 13

What does the ‘Original House’ stand for?

Answer 13

The house as it was originally built or as it stood on 1 July 1948 (if built earlier).

Question 14

Which of the following would not require planning consent?

A) Dividing a single property into separate homes
B) Converting an existing building, eg a barn
C) Building a new property
D) Work on a listed property or a property within a conservation area
E) Work on an existing property outside the scope of permitted development
F) Work that would contravene original planning consents
G) Converting a garage internally does not add to the size of the building.
H) Erecting aerials or satellite dishes is permitted.

Answer 14

G) Converting a garage internally does not add to the size of the building.
H) Erecting aerials or satellite dishes is permitted.

Question 15

Applications for listed building planning consent are made to the central government. True or false?

Answer 15

False.

They are made to the local authority.

Question 16

What government agency would the local authority consult for listed planning consent in England?

Answer 16

English Heritage

Question 17

What government agency would the local authority consult for listed planning consent in Wales?

Answer 17

CADW

Question 18

What government agency would the local authority consult for listed planning consent in Scotland?

Answer 18

Historic Environment Scotland

Question 19

What government agency would the local authority consult for listed planning consent in Northern Ireland?

Answer 19

The Northern Ireland Environment Agency

Question 20

What is a mortgage indemnity guarantee (MIG) policy?

Answer 20

A MIG is an insurance policy that protects the lender if the borrower defaults on the mortgage and the sale of the property does not provide enough money to repay the mortgage.

It will pay the lender the difference between the sale price and the outstanding mortgage, less an excess (usually 20 per cent of the amount claimed).

Question 21

The MIG premium is paid by the lender. True or false

Answer 21

False.

It is paid by the borrower

Question 22

The Mortgage Indemnity Guarantee is a contract between the borrower and the lender. True or false.

Answer 22

False.

It is a contract between the lender and the insurer

Question 23

A MIG insurer is entitled to exercise its right of subrogation within how many years of settling the claim?

Answer 23

6 years

Question 24

In a mortgage context, what is subrogation?

Answer 24

In a mortgage context, subrogation is the process by which the insurer can sue the borrower for recovery of the amount paid to the lender (the ‘insured person’).

Question 25

When a lender makes an MIG claim, they pay an excess (deducted from the amount they claim). Can the lender make the borrower pay the excess?

Answer 25

Yes. The lender has the right to claim the excess from the borrower, as long as they inform the borrower of the intention to do so within six years of the property being sold.

Question 26

An adviser is obliged to details he procuration fee they are paid. True or false.

Answer 26

False.

Advisers employed by the lender are not required to disclose this information.

Question 27

Since 1 April 2021, non‐UK residents purchasing property in England and Northern Ireland are subject to an SDLT surcharge. True or false

Answer 27

True

Question 28

When is SDLT payable?

Answer 28

Within 14 days of completion

Question 29

Who is liable for SDLT

Answer 29

The purchaser pays via their solicitor.

Question 30

What is the threshold above which first time buyer SDLT exemption does not apply?

Answer 30

£500,000

Question 31

The first time buyer exemption is available on multiple dwellings. True or false

Answer 31

False.

The FTB exemption is only available on single dwellings and therefore houses with a granny annexe are not exempt

Question 32

The second home SDLT surcharge is not applicable if someone is selling their main residence and replacing it. True or false?

Answer 32

True

Question 33

if the property is registered in the sole name of the husband and the wife decides to buy her own property, will her purchase will be subject to the second home surcharge?

Answer 33

Yes.

It is important to understand that, from an SDLT perspective, HMRC considers married couples and civil partners to be one ‘unit’ for property ownership.

Question 34

If their second main residence purchase is completed before the first main residence is sold. What happens from an SDLT perspective

Answer 34

SDLT is initially due, but they can claim a refund of SDLT if they dispose of their original property within 36 months of buying the new home.

Question 35

Sarah and Sally own a semi-detached house. The gate to their medium-sized front garden opens on to the pavement that runs parallel to the road. Which of the following would require planning consent? Select all that apply.

A) A loft extension measuring 35 cubic metres.
B) An extension to the front of the property.
C) A loft extension adding three feet to the existing roof height.
D) Converting the attached garage to a living room.
E) A single-storey rear extension measuring 3m from the original rear wall.
F) A two-storey rear extension ending 5.5m from their garden fence.

Answer 35

B) An extension to the front of the property.
C) A loft extension adding three feet to the existing roof height.
F) A two-storey rear extension ending 5.5m from their garden fence.

Details:
A loft extension measuring 35 cubic metres: permission not required for a semi-detached house if the loft extension does not exceed 40m3.

An extension to the front of the property: permission required as the extension will make the front of the property closer to the highway than before.

A loft extension adding three feet to the existing roof height: permission required as the extension will be higher than the highest part of the existing roof.

Converting the attached garage to a living room: permission not required as converting a garage internally does not add to the size of the building.

A single-storey rear extension measuring 3m from the original rear wall: permission not required on a single-storey extension projecting from the rear wall of the original house wall by up to 3m on a semi-detached property.

A two-storey rear extension ending 5.5m from their garden fence: permission required on two-storey extensions closer than seven metres to a rear boundary.

Question 36

Which of the following is exempt from building regulations?

A) Cavity wall insulation in a detached house.
B) Underpinning foundations on a property suffering from subsidence.
C) Detached 20m2 garage located 3m from the property boundary.

Answer 36

C) Detached 20m2 garage located 3m from the property boundary.

Both cavity wall insulation and underpinning are subject to building regulations. A detached garage under 30 square metres in floor area and built at least one metre from the boundary of a property is exempt.

Question 37

Keith and Helen wish to make several changes to their house, a Grade II* listed building in Devon. In terms of permission to carry out the work, they must:

A) apply first to their local planning authority.
B) apply first to Historic England.
C) first consult with the Department for Communities and Local Government

Answer 37

A) apply first to their local planning authority.

They must first apply to their local planning authority, which may then consult with Historic England.

Question 38

Which of the following would be a potential disadvantage of a homeowner using a ‘rent-a-roof’ scheme to take advantage of renewable energy?

A) A future buyer would be bound by the terms of the lease, which may deter them from buying.
B) The homeowner is responsible for ongoing maintenance of the panels.
C) The homeowner does not receive a significantly discounted rate on the electricity generated.

Answer 38

A) A future buyer would be bound by the terms of the lease, which may deter them from buying.

The company offering the ‘rent-a-roof’ scheme will have a legal lease to use the roof for 20–25 years and the lease will stay with the property. The company is responsible for maintenance of the panels. The homeowner receives a significantly discounted rate on the electricity generated; in some schemes the electricity is free.

Question 39

What is the legal status of a mortgage indemnity guarantee (MIG) policy?

A) It is a contract between the borrower and the insurer that provides protection for the borrower.
B) It is a contract between the lender and the insurer that provides protection for the lender.
C) It is a contract between the borrower and the lender that provides protection for both parties.

Answer 39

B) It is a contract between the lender and the insurer that provides protection for the lender.

Although usually paid for by the borrower, a MIG is an insurance contract taken out by the lender with the insurer to protect it in the event of default.

Question 40

A borrower providing security for a mortgage by signing over the benefits of a life assurance policy to the lender for the duration of the loan is called:

A) subrogation.
B) deposit.
C) assignment.

Answer 40

C) assignment.

Assignment involves the policyholder signing over the benefits of the life policy to the lender for the term of the mortgage. It gives the lender certain rights, including the right to surrender the policy if the borrower fails to make mortgage payments.

Question 41

Which of the following would the FCA not consider acceptable components of a lender’s mortgage exit fee? Select all that apply.

A) Interest penalty.
B) Deed release fee.
C) Staff processing costs.
D) Proportion of the lender’s lost income.
E) Land Registry charges.
F) Proportion of the lender’s general overheads.

Answer 41

A) Interest penalty.
D) Proportion of the lender’s lost income.

Interest penalties and the lender’s potential lost income are not acceptable components of a mortgage exit fee.

Question 42

Which of the following buyers would qualify for the first-time buyer exemption from stamp duty land tax (SDLT) when buying a property now? Select all that apply.

A) Gary, who is buying his first property with the help of a deposit funded by his mother using equity release on the family home.
B) Brian, who sold his flat five years ago and has rented since.
C) Alison, who is buying a flat with her father, who jointly owns the family home.
D) Manuel, who sold his apartment in Spain to move to the UK three years ago.
E) Mike, who is buying his first flat with a guarantee from his father secured on his house.
F) Grace, who is buying a shared-ownership flat and has opted to pay SDLT in stages.

Answer 42

A) Gary, who is buying his first property with the help of a deposit funded by his mother using equity release on the family home.
E) Mike, who is buying his first flat with a guarantee from his father secured on his house.

A first-time buyer is defined as someone who has never owned an interest in property before, anywhere in the world. For joint purchasers, both must meet the definition. Using a guarantee secured on someone else’s property, or the proceeds of equity release from someone else’s property, would not affect the right to the exemption. It is the status of the buyer that counts, not the type of mortgage or funding arrangemen

Question 43

SDLT applies in Scotland. True or false?

Answer 43

False.

False. Scotland has Land and Buildings Transaction Tax (LBTT).

Question 44

Linda and Joey have bought a home in Lancashire following Linda’s job change. They have yet to sell their previous home in Kent. What is the position regarding stamp duty land tax (SDLT)?

A) They will pay the standard rate of SDLT on the purchase of their Lancashire property.
B) They will have to pay the SDLT surcharge on their Lancashire property but can claim a refund if they sell their Kent property within 36 months.
C) They will have up to 36 months to sell their Kent property to avoid paying the SDLT surcharge.

Answer 44

B) They will have to pay the SDLT surcharge on their Lancashire property but can claim a refund if they sell their Kent property within 36 months.

If a homeowner buys a property intended for use as their main home before selling their existing home, they will have to pay the SDLT surcharge but can claim a refund of the surcharge if they sell their original property within 36 months.