Unit 4 – Topic 15 Flashcards
Other factors that affect the lending decision
Which of the following is true in relation to an endowment policy ? (15.7.2)
A. Unlikely to have a surrender value during the first five years
B. Can be assigned to a mortgage lender, but the lender has few rights over the policy
C. Can be deposited with a lender, thereby giving the lender an equitable right
D. If deposited with a mortgage lender, the lender has a legal right to the policy proceeds
C. Can be deposited with a lender, thereby giving the lender an equitable right
An alternative is for the borrower to deposit the life assurance policy document with the lender. Although the lender has no legal rights over the policy, the fact that the lender has been given the policy creates an ‘equitable right’ for the lender over the policy.
Mr and Mrs Jones are buying a property which was originally valued at £180,000 but has now been valued at £200,000. They are looking to arrange a mortgage loan of £170,000 and their lender makes a higher lending charge over 80% loan to value. How much of the couple’s loan, if any, will be subject to the charge ? (15.7.1)
A. Nil
B. £10,000
C. £20,000
D. £26,000
B £10,000
The lender will lend up to 80% of valuation with no higher lending charge. 80% x £200,000
= £160,000. The couple want a loan of £170,000, so £10,000 will be subject to the charge.
Maria had a home in Spain, which she sold for £30,000 in May 2022. At the same time she purchased her first property in the UK for £300,000. What Stamp Duty Land Tax, if any, was payable ? (15.9.1)
A. Nil
B. £2,500
C. £5,000
D. £14,000
C. £5,000
Maria doesn’t qualify for the first-time buyer exemption, because one of the criteria is that the buyer doesn’t own, nor has previously owned a major interest in a dwelling anywhere in the world. Maria owned a property in Spain. Maria will pay the standard rate of Stamp Duty Land Tax (SDLT),
which is calculated as follows :
£ 0 - £125,000 x 0%
£ 125,000 - £250,000 x 2% = £2,500
£ 250,000 - £300,000 x 5% = £2,500
Total = £5,000
A successful claim under a mortgage indemnity guarantee policy in connection with an endowment mortgage will grant a right of subrogation to the: (15.7.1)
A. lender
B. insurer
C. borrower
D. endowment provider
B. insurer
If the insurance company has paid out a claim on a mortgage indemnity policy to the lender, they can sue the borrower for this amount, under their right of subrogation. The insurer has six years to sue the borrower after settling the lender’s claim.
John paid a product fee and Jane paid an application fee. Which one of the
following statements regarding these fees, is correct ? (15.8.2)
A. John paid a booking fee when he applied for a variable rate mortgage.
B. Jane’s application fee could have included the cost of a basic property
valuation.
C. John’s product fee cannot be added to the loan must be paid for
separately.
D. Jane’s application fee was payable because she applied for a special deal.
B. Jane’s application fee could have included the cost of a basic property
valuation.
Check out the mortgage fees table on Figure 15.3 in your Mortgages study textbook. The basic difference between these two types of fee is that a booking or reservation fee is charged when the borrower wants a special deal, such as a fixed rate mortgage.
An arrangement fee is the fee for arranging credit and is sometimes known as the product or completion fee. It will often include the cost of a basic valuation.
A lender’s mortgage exit administration fee can include four acceptable components. Which of the following is not one of them ? (15.8.2)
A. Deed release fee
B. Land Registry charges
C. Higher lending charge
D. Staff processing cost
C. Higher lending charge
The component of the MEAF that’s missing is ‘a reasonable portion of general overheads’
A Mortgage Exit Administration Fee is the amount the lender charges when the mortgage is redeemed (paid off). The fee must be quoted under MCOB rules, but could change over the life of the mortgage.
Benny’s property has been taken into possession and sold by
his lender for £15,000 less than the mortgage debt. The lender
has received £12,000 from the insurer in full settlement under
the MIG policy. Which of the following is correct ? (15.7.1)
A. The insurer can sue Benny for £15,000
B. The insurer can sue Benny for £3,000
C. The lender can sue Benny for £12,000
D. The lender can sue Benny for £3,000
D. The lender can sue Benny for £3,000
Having claimed on their MIG policy, the lender has only received £12,000 from the insurer, so they’re still £3,000 out of pocket; they can sue Benny for this amount. The insurer can sue Benny for £12000, the amount paid to the lender, but we don’t have that option in the question. Either way, Benny is going to have to cough up £15,000 - £3,000 to the lender and £12,000 to the insurer.
Ravi owns a family property in Leeds. What Stamp Duty Land Tax would he
pay on the purchase of a buy-to-let property for £ 220,000 ? (15.9.2)
A. £7,330
B. £6,600
C. £9,000
D. £11,000
B. £6,600
SDLT thresholds were raised in the September 2022 mini-budget. Buy-to-let property purchasescarry an additional 3% Stamp Duty. With a new threshold of 0% up to a property value of £250,000, Ravi would pay 3% on the full £220,000 = £6,600.
A number of companies offer ‘Rent-A-Roof’ schemes. In return for the installation of solar panels, they will have a legal lease to use the property’s roof for a period of : (15.5)
A. 5-10 years
B. 10-15 years
C. 15-20 years
D. 20-25 years
D. 20-25 years
A few companies offer ‘rent-a-roof’ schemes, where they lease the property’s roof for a
period of 20–25 years in return for installing solar panels on it. The company pays for
installation and ongoing maintenance of the panels.
Charles has incurred various charges with his recent house purchase and
mortgage application. Which one was in respect of services after completion? (15.8.4)
A. Bankruptcy search
B. Environmental search
C. Land Registration fee
D. Land Registry search fee
C. Land Registration fee
Payable to the Land Registry after completion of the sale, to register the property in the new
owner’s name. The fees range from £40 for a property sold for £80,000 or less, to £910 for a
property sold for more than £1m where application is made by post
Under its Right of Subrogation, in the event of a mortgage shortfall, the insurer will claim from : (15.7.1)
A. the lender
B. the borrower
C. the mortgage indemnity policy
D. the borrower’s solicitor
B. the borrower
Subrogation is the right of an insurer to sue a third party (eg the borrower) that caused
an insurance loss to the insured person (the lender)
Of the following property buyers, which one would qualify for the first-time buyer SDLT exemption ? (15.9.1)
A. Vera, who sold a flat three years ago and has lived. in rented accommodation since then.
B. Chuck, who is buying his first property for £600,000
C. Dave, whose father has re-mortgaged the family home to raise money to help him with the deposit on his first house purchase.
D. Paul, who is buying a first property with his mother, who sold her previous property two years ago.
C. Dave, whose father has re-mortgaged the family home to raise money to help him with the deposit on his first house purchase.
Not A = The exemption is only available to those who don’t own, nor have previously owned property, anywhere in the world.
Not B = The exemption is only available for properties valued at £300,000 or lower
Not D = Paul’s mother has owned property before
Shirley is selling her home to Bob. The estate agent’s fees are payable by: (15.8.1)
A. Shirley at completion
B. Shirley at exchange of contracts
C. Bob at completion
D. Bob at exchange of contracts
A. Shirley at completion
Estate agent fees are paid by the vendor once the sale has been completed and can vary between 1 and 3.5 per cent of the sale price.
