U6: T24 - OTHER MORTGAGE PRODUCTS Flashcards
What kind of legal entity an SPV is?
An SPV is a limited company.
Who owns the property held in an SPV?
The SPV owns the property. Individuals own shares in the SPV but do not own the property directly and are not normally liable for any debts incurred by the SPV.
What a second charge is and the rules under which it is regulated?
A second charge is a loan secured on a property by a lender other than the first mortgagee; such loans are typically offered by banks and finance houses. Second‐charge lending is regulated under MCOB rules.
Foreign currency mortgages can be secured on UK properties. True or false?
True
Which of the following is true of a typical sub‐prime mortgage compared with a standard mortgage?
a) Interest rates are usually slightly lower.
b) Arrangement fees tend to be higher.
c) Maximum loan to value tends to be higher.
d) The range of interest‐rate options is very limited.
b) Application and/or product fees tend to be higher.
Which of the following is true in relation to a guarantor mortgage?
a) The guarantor must agree to guarantee the whole mortgage.
b) The guarantor must be able to afford their own commitments as well as the guarantor mortgage.
c) Most lenders will consider guarantors up to the age of 75, as long as they prove sufficient income in retirement.
d) The guarantee usually lasts for the term of the mortgage unless the lender is satisfied it is no longer needed.
b) The guarantor must be able to afford their own commitments as well as the guarantor mortgage.
The guarantor must be able to afford their own commitments as well as the guarantor mortgage.
Islamic home purchase plans reflect the principle that Muslims must not enter into transactions where interest is paid. True or false?
True
Which of the following is true of both Ijara and Murabaha methods of Islamic home finance?
a) The bank buys the property initially.
b) The term can be up to 25 years.
c) They require the payment of rent.
d) Monthly payments are fixed for the term.
a) The bank buys the property initially.
Self‐build mortgages usually provide funds for up to 90 per cent of the cost of the land. True or false?
False: self‐build mortgages usually provide funds for up to 75 per cent of the land cost.
Which, if any, of the following is not an allowable expense for a BTL landlord?
a) Buildings and contents insurance.
b) Repairs to a broken window.
c) Replastering the kitchen ceiling following a water leak.
d) An allowance for damage caused by wear and tear to furnishings.
d) The landlord could claim for actual expenses incurred in replacing or repairing furnishings but cannot claim an allowance under the general description of wear and tear.
Joe is planning to invest in a buy‐to‐let property when he gains access to his pension fund in August this year and is unsure whether to use an SPV or buy a property in his own name. Which of the following would be an important consideration for him?
a) The SPV will pay higher stamp duty land tax.
b) The SPV will be able to claim mortgage interest as a business expense in full.
c) Holding the property in his own name will enable him to avoid paying income tax on rental income he does not withdraw from the business.
d) Joe would lose control of the property if he bought it through a SPV.
b) The SPV will be able to claim mortgage interest as a business expense in full.
If Joe were to go ahead and set up the SPV and later sell his shares in it, the buyer of the shares would be liable for stamp duty. True or false?
True. Stamp duty is payable on the transfer of shares within an SPV, but there is no liability to stamp duty land tax because the property itself does not change hands.
Capital gains made on sale of a property by an SPV are subject to:
a) corporation tax.
b) capital gains tax.
c) income tax.
d) stamp duty land tax.
A) Corporation tax – capital gains made by an SPV are treated as trading receipts.
A foreign mortgage is:
A) in a foreign currency and secured on a UK property
B) in UK currency and secured on a foreign currency
A) in a foreign currency and secured on a UK property
Lenders are unlikely to consider guarantors over the age of?
A) 55
B) 65
C) 75
B) 65