Unit 3 Topic 2 Flashcards
Types of borrower
In order for trustees to arrange a mortgage to buy a property for a beneficiary, the lender would: (2.2.7)
A. carry out a credit search on the trustees
B. require evidence that the trustees are specifically given the power to borrow
C. require proof of the beneficiary’s earnings
D. require proof that the beneficiary is aged 18 or over
B. require evidence that the trustees are specifically given the power to borrow
Before lending to trustees, a lender should establish that the trustees have the power to borrow.
What type of organisation is restricted by legislation on the amount of commercial mortgage lending it provides to corporate borrowers? (2.4)
A. Bank
B. Building society
C. Finance House
D. Property investment companies
B. Building society
Building societies are restricted under the provisions of the Building Societies Act in respect of corporate lending.
It’s worth remembering that a maximum of 25% can be held in loans from Building Societies to companies. So, max 25% for corporate and minimum 75% for residential.
Lenders can lend to the personal representatives of a deceased person’s estate. If the deceased left no will, the representative is known as: (2.2.5)
A. an executor
B. an administrator
C. a beneficiary
D. a trustee
B. an administrator
Lenders are able to lend to the personal representatives of an estate. If the deceased left no will, the
representative will be an administrator.
Who is legally able to take out a mortgage to purchase a new property? (2.7.3)
A. Diane, who became a discharged bankrupt six months ago
B. Jane, whose bankruptcy order came into force ten months ago
C. Mary, who is 17 years of age and is about to move in with her boyfriend, with her parent’s consent
D. Sarah, who has lost her mental capacity and is the subject of a property and affairs lasting power of attorney.
A. Diane, who became a discharged bankrupt six months ago
Diane can borrow because she is now discharged from bankruptcy.
Jane can’t borrow because she’s an undischarged bankrupt and cannot acquire an interest in property.
Mary is under 18 and a minor, so is not able to borrow.
Sarah has lost mental capacity. A person who is mentally incapacitated cannot borrow in their own right, another person would have to act for them.
Lasting Powers of Attorney must be set out in a specified form and to be
effective, must be registered with (2.8.2)
A. The Court of Protection
B. The Public Guardianship Office
C. The Office of the Public Guardian
D. The Public Trustee
C. The Office of the Public Guardian
An LPA must be registered with the Office of the Public Guardian (OPG) to be effective.
A registered Enduring Power of Attorney (EPA) can only be revoked after confirmation from : (2.8.3)
A. The Court of Protection
B. The Public Guardianship Office
C. The Procurator Fiscal
D. The Office of the Public Guardian
A. The Court of Protection
If an EPA has been registered, it may be revoked, but only after confirmation from the Court of
Protection that the donor (the individual) understands the implications.
If not asked, an undischarged bankrupt is legally allowed to borrow up to what amount without disclosing their bankruptcy to a lender? (2.7.3)
A. £250
B. £500
C. £1,000
D. £5,000
B. £500
For amounts up to £500, an undischarged bankrupt is legally allowed to borrow and is not required to disclose their bankruptcy, unless asked.
Mr Jones is subject to an IVA and now wishes to apply for a mortgage. Which of the following statements is correct? (2.7.4)
A. He cannot borrow.
B. He can only borrow with the consent of the creditors.
C. He must wait for 12 months from the date of the IVA before applying.
D. Lenders may be unwilling to consider an application.
D. Lenders may be unwilling to consider an application.
An IVA doesn’t legally prevent someone from taking out a mortgage, but lenders would consider them
a poor risk and may not be willing to consider an application.
Accidental landlord
A loan provided to an individual secured by a first charge over a property that will be let on the open market, which is not entered into by the borrower wholly or predominantly for business purposes, will be: (2.2.2)
A. A commercial mortgage
B. A consumer buy-to-let mortgage
C. An MCD exempt mortgage contract
D. unregulated
B. A consumer buy-to-let mortgage
These borrowers haven’t set out to purchase a property for rental purposes, but because of personal
circumstances need to let out the property – for example, they may have inherited a property.
These types of borrower are sometimes known as ‘accidental landlords’. If a mortgage is arranged, it
would be classed as a consumer buy-to-let mortgage and subject to FCA regulation.
Keith has heard that he can use a special purpose vehicle (SPV) to purchase a buy-to-let property with a mortgage. Which of the following statements is not true in relation to these arrangements? (2.3.3)
A. Keith is not personally liable for the mortgage
B. Keith owns and controls the SPV
C. In most cases, the lender would require a personal guarantee from Keith
D. Keith is not a shareholder, but directly owns the property
D. Keith is not a shareholder, but directly owns the property.
D is an incorrect statement. Keith will become a shareholder of the company but will not directly own
the property. The company is the registered legal owner of the property.
With regard to mortgage loans to partnerships and limited liability partnerships (LLPs),
which of the following statements is correct? (2.3.2)
A. With a limited liability partnership, each partner is jointly and severally liable for the mortgage debt.
B. With a business partnership, partners do not have a direct liability for the debt
C. Mortgage lending would be provided to the limited liability partnership (LLP) itself, rather than to the individual partners.
D. Mortgage lending directly to an LLP is regulated.
C. Mortgage lending would be provided to the limited liability partnership (LLP) itself, rather than to the individual partners.
The lender, however, may wish to take personal guarantees from the partners.
A mortgage lender would treat which of the following as a ‘vulnerable customer’? someone: (2.6.2)
A. who was approaching State pension age
B. who was 30 years of age.
C. who was considering the purchase a property, using the statutory right to buy.
D. who had just started a new job.
C. who was considering the purchase a property, using the statutory right to buy
Because of the nature of the financial arrangement they’re considering, the following would be regarded
as vulnerable by the FCA:
- Those buying a property using the statutory right to buy
- Those entering a sale-and-rent-back arrangement
- Equity release applicants
