Unit 3:2 People (Types of Borrower) Flashcards
1
Q
3 Ps
A
- Person
- Purpose
- Property
2
Q
Person
A
- who can/cant borrow according to the law
- if there are no legal barriers, whether lender will accept applicant
- how much lender should consider lending
3
Q
Jointly and Several Liability
A
- all parties are liable for the whole amount of the loan, not just their ‘share’ of it
4
Q
Buy to Let borrowers
A
- regulated by PRA not the FCA
5
Q
Consumer Buy to Let
A
- falls under MCD regulations (unlike standard BTLs)
- designed for accidental landlords who didn’t plan to be landlords (inherited property, job relocation, etc.)
- not primarily for business/investment purposes
- comes with consumer protections through FOS and FSCS
- lenders must assess affordability similar to residential mortgages
- sits between unregulated BTL and fully regulated residential mortgages
6
Q
High Net Worth Clients
A
- income £300k+ (per person not couple) or assets £3m+ (net, after tax)
- bespoke lending for complex finances
- often entrepreneurs/self-employed
- thorough credit assessment
- lower LTVs expected
- specialist underwriting process
- wider product range available
- relationship-based service mode
7
Q
Professional Customer
A
- someone who has worked in home finance sector for a year at least (CEMAP)
- dont have to receive advice
8
Q
Who can legally borrow
A
- executors
- attorneys
- trustees
- clubs and associations
9
Q
Business Mortgages (Regulated)
A
- at least 40% of land is used as residence
- sole purpose is to raise funds for business
- cant be purely business premises
10
Q
Special Purpose Vehicle
A
- limited company just for owning property
- popular for buy-to-let investors instead of personal ownership
- you own shares in the company, not the property directly
- protected from debts unless you sign a personal guarantee
- pays corporation tax like other companies
- mortgages to spvs not regulated by FCA
- separate legal entity from you
11
Q
Building Societies Restrictions
A
- only up to 25% of assets can be commercial loans
- loans to companies secured on land count in this 25%
- keeps them focused on their main purpose - home loans
12
Q
Mortgage Prisoners
A
- borrowers stuck in existing mortgages
- can’t switch despite good payment history
- caused by stricter rules, negative equity, or credit changes
- often paying higher rates than necessary
- affected by 2008 crisis and 2016 affordability rules
- limited options to escape
13
Q
Vulnerable Customers
A
- bad health
- life events (death, job loss, divorce)
- resilience
- capability (can’t understand certain things)
- Additional Vulnerable Customers: right to buy, sale and rent back, equity release
14
Q
Insolvency and Bankruptcy
A
- Insolvency occurs when: a persons liabilities exceed their assets
(a persons is in too much debt to be able to pay off mortgage)
15
Q
Individual Voluntary Agreements (IVAs)
A
- legal debt solution between debtor and creditors
- usually 5-6 years of reduced payments
- managed by insolvency practitioner
- debt written off after completion
- affects credit file for 6 years
- legally can apply for mortgage but lenders will be hesitant
16
Q
Debt Relief Order
A
- for debts under £30,000
- for those with low income, minimal assets (under £2,000)
- debts frozen for 12 months then written off
- can’t own property
- costs £90
- affects credit file for 6 years
- legally can apply for mortgage but lenders will be hesitant
17
Q
Bankruptcy and borrowing
A
- undischarged bankrupt cannot get a mortgage
- if they have a mortgage they could try get further advance or remortgage same property (not a second charge)
- will be hard nearly impossible
- If bankrupts wish to borrow they must declare credit history
