Unit 5

Question 1

Which of the following standard perils are specific to contents insurance?
A. Damage by storm and flood; damage or losses caused by theft and attempted theft
B. Damage caused due to frozen or burst pipes; damage caused by impact from falling trees
C. Damage to computers and TVs; replacement of locks and keys; theft of the insured’s money from another building
D. Subsidence, landslip and heave

Answer 1

C. Damage to computers and TVs; replacement of locks and keys; theft of the insurer’s money from another building.

Question 2

Which rider benefit splits a joint life or CIC policy unto two single policies if the need is evidenced?
A. Separation benefit
B. Replacement benefit
C. Life changes benefit

Answer 2

A. Separation benefit

Question 3

Consumers’ main duty of disclosure when entering into, or renewing, an insurance contract is:
A. Utmost good faith
B. Fair representation
C. Disclosure of all material facts

Answer 3

B. Fair representation.

Question 4

Which piece of documentation is normally issued when the recommendations are presented to the customer?
A. Acceptance letter
B. Key Facts Document (KFD)
C. Cancellation notice

Answer 4

B. Key Facts Document (KFD).

Question 5

For an interest-only retirement mortgage, it is true to say:
A. The lender must assess the borrower’s ability to meet the mortgage repayments
B. The lender is required to carry out a review of the borrower’s repayment strategy at least once during the term
C. No regular augments are required from the borrower

Answer 5

A. Retirement interest-only mortgages are pure interest-only mortgages and require an affordability assessment. They do not require a repayment vehicle.

Question 6

Once added to the GSA, reversionary bonuses:
A. Cannot be removed but may be reduced if the policy is surrendered early
B. Cannot be removed but may be reduced if the policyholder dies before the policy reaches maturity
C. May be removed if the policy is made paid up
D. Cannot be removed or reduced in any circumstance

Answer 6

A. Cannot be removed but may be reduced if the policy is surrendered early.

Question 7

What type of endowment policy has reduced premiums for the first five years?
A. Unit-linked endowment
B. Low-cost with-profits endowment
C. Unitised with-profits endowment
D. Low-start low-cost with-profits endowment

Answer 7

D. Low-start low-cost with-profits endowments have reduced premiums for the first five years.

Question 8

Which of the following types of unit-linked funds is most commonly used for investment for mortgage repayment purposes?
A. Fixed interest
B. UK equities
C. Managed
D. Property

Answer 8

C. Managed (balanced funds) are the choice of most mortgage investors. Fund mandate is to produce reasonable capital growth without taking excessive risks.

Question 9

Duncan is applying for State financial assistance and has been asked to produce evidence of his income. This suggests he is NOT applying for:
A. Pension credit
B. Contribution-based Jobseeker’s Allowance
C. Universal credit
D. Council tax reduction

Answer 9

B. Contribution-based Jobseeker’s Allowance
Contribution-based JSA is paid up for 6 months, but only if you paid enough NIC 1s when you were working.

Question 10

Marianne is considering whether to purchase a life assurance policy with a guaranteed insurability option. What benefits does this confer on Marianne?
A. To take a further life assurance policy at the end with no medical underwriting
B. To make adjustments to the monthly premium to suit affordability
C. To increase the sum assured with no further medical underwriting
D. To make multiple claims for the same medical condition

Answer 10

C. To increase the sum assured with no further medical underwriting.
Guaranteed insurability options enable the sum assured to be increased without the need for medical underwriting.

Question 11

Terminal illness cover, accidental death benefit, and total and permanent disability cover are all types of:
A. Private Medical Insurance
B. Income Protection Insurance
C. Death Benefit
D. Rider Benefit

Answer 11

D. Rider Benefit.
Rider benefits are offered for a customer to increase their level of cover on life assurance, CIC or IPI plans. Sometimes they are automatic features but are usually additional charged options.

Question 12

Private Medical Insurance (PMI) is aimed at covering:
A. Acute conditions
B. Chronic conditions
C. Debilitating conditions

Answer 12

A. PMI is aimed at covering acute conditions, which develop rapidly and respond to treatment.

Question 13

Income Protection Insurance benefits cease on the earliest of recovery and end of policy term, death or what?
A. Redundancy
B. Retirement
C. Subrogation

Answer 13

B. IPI cease on retirement.

Question 14

Personal Independence Payments is usually payable when the person has had difficulties with daily living or mobility for however many months and expects their difficulties to continue for however many months?
A. Three months and nine months
B. Three months and six months
C. Three months and three months

Answer 14

A. Three months and nine months.

Question 15

Support for Mortgage Interest payments are calculated using:
A. The borrower’s actual mortgage interest rate
B. The Sonia rate
C. A standard rate of interest

Answer 15

C. SMI payments are calculated using a standard rate if interest, rather than the borrower’s actual pay rate.

Question 16

With mortgage protection assurance, the sum assured:
A. Increases by lesser monthly amounts near the start and by larger amounts towards the end of the term
B. Decreases by larger monthly amounts near the start and by lesser amounts towards the end of the term
C. Decreases by lesser monthly amounts near the start and by larger amounts towards the end of the term

Answer 16

C. With mortgage protection assurance, the sum assured - like the mortgage - decreases by lesser monthly amounts near the start and by larger amounts towards the end of the term.

Question 17

If PPI is arranged in a joint basis to protect both mortgage borrowers, the premium will be:
A. The same as that quoted to protect one borrower
B. Double the amount quoted to protect one borrower
C. Variable depending on the second borrower’s health

Answer 17

B. The premium will be double the amount quoted to protect one borrower.

Question 18

Which rider benefit can allow an accelerated payment of death benefit on a life or IPI policy where the life assured has a short life expectancy?
A. Accidental death benefit
B. Guaranteed insurability
C. Terminal illness cover

Answer 18

C. Terminal illness cover can allow an accelerated payment where the life assured has a short life expectancy, typically of under 12 months.

Question 19

Personal accident insurance offers:
A. Lump-sum payments
B. Income payments
C. Combined income and lump-sum payments

Answer 19

A. Personal accident insurance policies offer, as opposed to the income benefits or ASU, lump-sum payments in the event of specified conditions arising due to an accident.

Question 20

For a Mortgage Protection Payment Income policy, the maximum period of cover an insurer may offer is:
A. One year
B. Two years
C. Three years

Answer 20

B. MPPI benefit is payable for a maximum period of up to two years, depending on policy terms.

Question 21

Consumers’ main duty of disclosure when entering into, or renewing, an insurance contract is:
A. Utmost good faith
B. Fair representation
C. Disclosure of all material facts

Answer 21

B. Fair representation is the main duty of disclosure for consumers.

Question 22

Which section of ICOBS state that firms must take reasonable steps to ensure the suitability of advice to any customer who is entitled to rely on their judgement?
A. ICOBS 5
B. ICOBS 6
C. ICOBS 7

Answer 22

A. ICOBS 5: Identifying client needs and advising

Question 23

Cancellation of insurance policies is covered under which section of ICOBS?
A. ICOBS 5
B. ICOBS 6
C. ICOBS 7

Answer 23

C. ICOBS 7: The rights and effects of cancellation.
For most insurance contracts, under ICOBS 7 there is a short cooling-off period during which the customer can cancel without penalty.

Question 24

David has previously benefited from Support for Mortgage Interest (SMI) loan payments, which ceased when he found a new job. If he loses his job again and makes a new claim for SMI, he will not be subject to a waiting period provided that his previous SMI claim:
A. Ceased within the last 52 weeks
B. Ceased more than 52 weeks ago
C. Was for fewer than 26 weeks
D. Was for more than 26 weeks

Answer 24

A. He is not subject to a waiting period provided that his previous SMI claim ceased within the last 52 weeks.
It is not the period of claim that is important, it is the period for which payments have ceased since a previous claim that was subject to a waiting period.

Question 25

Under the terms of the borrower’s covenant, what access, if any, must the borrower allow the lender for inspection purposes?
A. None
B. Access at all times
C. Access at any reasonable time
D. Access only with 28 days written notice

Answer 25

C. Access at any reasonable time.
There is no requirement for the lender to give any specific notice; but the borrower must allow the lender access for inspection purposes at any reasonable time.

Question 26

Which of the following is true? An FCA regulated mortgage contract is:
A. Subject to the Consumer Credit Acts if it exceeds £25,000
B. Exempt from the Consumer Credit Acts
C. Subject to the Consumer Credit Acts if it is taken out for business purposes
D. Exempt from the Consumer Credit Acts if the borrower signs a disclaimer

Answer 26

B. FCA regulated mortgage contracts are exempt from the Consumer Credit Acts.

Question 27

When arranging a mortgage, at what point does the legal charge take effect?
A. Before exchange of contracts
B. On exchange of contracts
C. On completion
D. After completion

Answer 27

C. On completion.
A legal charge cannot be executed on exchange of contracts because, although both parties have signed a contract and have become legally obligated to proceed with the purchase, the legal ownership of the property is still with the vendor until completion.
The legal charge is executed ON COMPLETION.

Question 28

Which of the following statements in respect of the role of an estate agent, in relation to the sale and purchase of a property, is true?
A. An estate agent is not permitted to charge a fee if a sale is not completed
B. Many estate agents charge a very high rate of commission if they are the sole agent
C. The estate agent acts as an agent of the vendor and the purchaser
D. The estate agent acts as an agent of the vendor but not the purchaser

Answer 28

D. The estate agent acts as an agent of the vendor but not the purchaser.
If the estate agent were to act for both, this would cause a conflict of interest.

Question 29

Sam has made a claim on his combined life and critical insurance policy.
Under which of the following will the insurer allow Sam to potentially arrange a small amount of life cover without medical underwriting?
A. Buy back option
B. Continuing plan option
C. Continuous cover option
D. Whole-of-life option

Answer 29

A. Buy back option.
A buy back option exists when an insurer allows a policyholder to purchase a small amount of life cover without medical underwriting. These circumstances give rise to an exclusion being applied, meaning that any claim will not be paid.

Question 30

Where a life assurance policy has lapsed, within what maximum period will the insurer typically allow the policy to be reinstated, provided that all outstanding premiums are paid?
A. 6 months
B. 9 months
C. 12 months
D. 24 months

Answer 30

C. 12 months.
The typical maximum reinstatement period is 12 months providing all outstanding premiums are paid and evidence of continued good health is provided.

Question 31

Personal independence payment is payable to a person who has had difficulties with daily living or mobility for a minimum of the previous:
A. One month
B. Three months
C. Six months
D. Nine months

Answer 31

B. Three months.
A person who has had difficulties with daily living or mobility for three months is eligible to be considered to receive PIP.

Question 32

How would dividends received in an ISA be treated tax-wise?
A. All dividends would be paid gross but would be taxable
B. Dividends above the dividend allowance would be taxable
C. Dividends would be paid with a tax credit that is not reclaimable, although the net dividend received would not be taxable
D. Dividends would not be taxable

Answer 32

D. Dividends would not be taxable.
Dividends are paid without any tax deducted or credited. And as they are in an ISA they would not be taxable. The dividend allowance applies to dividends received outside an ISA.

Question 33

Andrew is concerned about any potential tax penalty should his pension fund exceed the Lifetime Allowance when he comes to take benefits. What potential charges would apply to the excess over the amount?
A. A single charge of 25%, irrespective of how the benefits are taken
B. A single charge of 55%, irrespective of how the benefits are taken
C. A charge of 25% if the excess is used to provide an income, or 55% if it is used to provide a lump sum
D. A charge of 55% if the excess is used to provide an income, or 25% if it is used to provide a lump sum

Answer 33

C. If the fund exceeds the Lifetime Allowance on taking the benefits, there is a 25% tax charge if it is taken as income, or 55% tax charge on the excess if taken as a lump sum.

Question 34

Once a lender is aware their borrower is in arrears with regards to their mortgage, it is required to write to them within:
A. 5 business days
B. 7 business days
C. 15 business days
D. 30 business days

Answer 34

C. The lender must write to the borrower within 15 business days of becoming aware that the account is in arrears.

Question 35

What is the main reason why stocks and shares ISAs are likely to produce higher values on final encashment than a similar investment portfolio of unit trusts?
A. A unit trust portfolio will always be subject to higher charges over the term
B. ISAs always reinvest dividends paid
C. ISAs are more adventurous, which means the potential for growth is higher
D. ISAs are free from income and capital gains taxes

Answer 35

D. ISAs are free from income and capital gains taxes.

Question 36

If Carol died during the term of her unit-linked endowment policy, the amount that the policy would pay out on her death would be:
A. A fixed sum of the amount she borrowed initially
B. An amount equivalent to the projected maturity value at the time of her death
C. The amount outstanding in her mortgage at the time of her death
D. The sum assured under the policy, or the value of the units, whichever is greater

Answer 36

D. The death benefit under a unit-linked endowment policy is the sum assured of the value of the units, whichever is greater.

Question 37

When borrowers decide to arrange bridging finance, they should be aware that:
A. An open bridging loan would be subject to a lower interest rate than a closed bridging loan
B. The lender will not be required to assess affordability if the interest is rolled up
C. The lender will not be required to assess affordability or suitability for any form of bridging finance
D. They would always be able to borrow up for 90% loan to value (LTV) with a bridging loan secured on the new home only

Answer 37

B. The lender will not be required to assess affordability if the interest is rolled up.
A bridging loan is not subject to full MCOB requirements, but the lender will need to demonstrate affordability and suitability unless the loan is on a roll-up basis.

Question 38

Paul is self-employed and keeps very basic accounts, he is unsure what information the lender will require about his income in order to assess his application.
Given his business situation, which documentation is he most likely to be able to provide?
A. Accountant’s certificate
B. Detailed accounts
C. HMRC self-assessment tax calculation
D. Profit and loss account

Answer 38

C. HMRC self-assessment tax calculation.
The profit and loss account forms part of a detailed set of accounts which Paul does not keep.

Question 39

Philip was subject to a bankruptcy petition from creditors. This means he has unpaid debts of at least:
A. £500
B. £750
C. £1,000
D. £5,000

Answer 39

D. The minimum debt for a bankruptcy petition is £5,000.

Question 40

A couple have considered to raise additional funds for a loft extension through a remortgage with their lender, a building society. What advantage does a further advance offer them over a remortgage?
A. No stamp duty land tax would be payable
B. The lender would not be required to carry out a full affordability assessment
C. The lender would not have to carry out an assessment of the property.
D. The total costs for the arrangement would be lower

Answer 40

D. The total costs for the arrangement would be lower.
A building society must always carry out an assessment of the property value, although this does not have to be through a formal valuation.

Question 41

What requirement for additional security, if any, is likely to be a condition of the offer by a lender if the further advance application of the borrower is approved?
A. A higher lending charge
B. Assignment of the existing endowment policy
C. Mortgage payment protection insurance
D. None

Answer 41

D. None.
There is no reason for the existing endowment policy to be assigned.

Question 42

James has been advised that if his application for a further advance is successful to buy out his separating partner’s equity in his property, a new mortgage deed may not need to be drawn up.
This is most likely because:
A. It will be a second charge
B. The current mortgage obliges the lender to make further advances, subject to certain criteria
C. The loan will be exempt from regulation as it is not a new mortgage
D. There are no subsequent charges registered against the property

Answer 42

B. The current mortgage obliges the lender to make further advances, subject to certain criteria.
If the original mortgage did oblige the lender to make further advances, the new loan can be provided without the need for a new mortgage deed.

Question 43

Sally is considering moving in and sharing the mortgage for her partner John’s flat. Which of the following is the lender most likely to consider to be of most importance if Sally is to be added to the mortgage deed?
A. Confirmation of Sally’s ISA fund
B. Evidence of a satisfactory credit history for Sally
C. Property valuation
D. The consent of the endowment provider

Answer 43

B. Evidence of a satisfactory credit history for Sally

Question 44

Which of the following statements is TRUE in relation to the Help to Buy Equity Loan scheme for a new build property in England?
A. Buyers must have a deposit of at least 10%
B. From the start of year six, an annual fee of 1.75% of the equity loan will be charged
C. It is exclusively for first-time buyers
D. The maximum property purchase price is £500,000

Answer 44

B. From the start of year six, an annual fee of 1.75% of the equity loan will be charged.
The maximum property value varies between regions from £186,000 in the North East to £437,000 in the South East.
For the London scheme it is up to £600,000 and the loan is increased to 40% of the full purchase price.

Question 45

Which of the following statements is TRUE in relation to an application in July 2019 for a three-year fixed-rate buy-to-let mortgage for business purposes for a basic-rate taxpayer?
When assessing affordability, Prudential Regulatory Authority (PRA) rules mean lenders:
A. Cannot take other income into account if the rent is not sufficient to pay the mortgage
B. Must apply the process to existing borrower who wish to switch to a new deal without borrowing more
C. Must assume interest rates will rise by at least 2% during the next five years
D. Must require rent (after taxes and expenses) to be at least 145% of the monthly mortgage payment

Answer 45

C. Must assume interest rates will rise by at least 2% during the next five years.
Lenders are required to assess affordability by using an interest coverage ratio. There is no set ratio, although the PRA has stated that 125% is a realistic minimum and also 145% for higher-rate taxpayers is typical.

Question 46

The FCA requires life assurance companies to carry out a review of a mortgage endowment:
A. Every two years
B. Every five years
C. Once during the policy term
D. Annually during the last five years of the term

Answer 46

A. Every two years.

Question 47

Which of the following would apply to sale of any protection products a mortgagor was advised to take out by the lender’s adviser?
A. A 28 day cancellation period
B. MCOB rules would apply to the sale
C. The adviser must give the borrower a statement of demands and needs
D. The adviser must give the borrower a suitability report

Answer 47

C. The adviser must give the borrower a statement of demands and needs for the sale of pure protection products.
A suitability report is a requirement under COBS for sales of investment related plans.

Question 48

Roy is applying for a remortgage with his first-charge lender and feels strongly that he does not have to pay for another valuation.
Which of the following statements is correct in answer to Roy’s point about the need for a valuation?
A. A valuation is a legal requirement for all mortgage lenders on all loans
B. He can avoid the cost of having a valuation, but a lower loan-to-value ratio will apply
C. He can insist on not having a valuation, but the lender may require additional security on the property
D. The lender has the right to decide how to assess the property’s suitability as security and can insist on a valuation

Answer 48

D. The lender has the right to decide how to assess the property’s suitability as security and can insist on a valuation.
Under the Building Societies Act 1986, the lender must assess the suitability of the property as security for the loan, and can decide on the most appropriate method of doing so. Although a valuation is not a legal requirement, it is an example of best practice and common sense followed by lenders.

Question 49

In relation to MCOB rules on responsible lender, with regards to an interest-only mortgage with a linked pension term assurance, the lender will:
A. Assess affordability on the basis of the mortgage interest only
B. Assess affordability on the basis of the mortgage interest, plus the cost of the personal pension
C. Have the option to allow the borrower to self-certify their income
D. Refuse to consider an interest-only mortgage

Answer 49

B. Assess affordability on the basis of the mortgage interest, plus the cost of the personal pension.
The rules on responsible lending require lenders to assess affordability on the basis of the mortgage interest, plus the cost of a suitable repayment vehicle.

Question 50

Which of the following is true of the options available to an individual when taking their pension benefits?
A. If they took a tax-free lump sum, they must start taking a minimum amount of income
B. They would have to take all their pension benefits at the same time
C. The maximum income using flexi-access drawdown is limited to the equivalent income from an annuity
D. The uncrystallised funds pension lump sum option would allow them to take the whole fund as a lump sum

Answer 50

D. The uncrystallised funds pension lump sum (UFPLS) would allow them to take the whole fund as a lump sum. They would be able to take 25% as a tax-free lump sum, plus any other amount needed, although the excess over 25% would be taxable as income.

Question 51

A pension term assurance, compared with other types of term assurances provides:
A. Less stringent underwriting criteria
B. Reduced costs through tax relief
C. Reduced tax penalties on the proceeds
D. The option to increase or decrease the term

Answer 51

B. Reduced costs through tax relief.
Pension term assurance policies taken out before December 2006 will still have the benefit of tax relief on premiums.
Once the policy is in place, there is no option to increase or decrease the term.

Question 52

What figure will the lender take as a self-employed sole trader’s income when assessing affordability? Their:
A. Drawings
B. Gross profit
C. Gross turnover
D. Net profit

Answer 52

D. Net profit for a self-employed sole trader is the broad equivalent of salary for an employee.
A self-employed sole trader may draw more from the business than their earn, for example they could be living on borrowed money. Conversely, they may choose to take less than their net profit, although they would be taxed on the full amount.

Question 53

Gerald has agreed to gift half of the equity of his £280,000 property to his new wife Yvonne, and Yvonne has also agreed to become jointly responsible for the £140,000 mortgage.
In relation to Yvonne becoming joint owner and mortgagor of the property, the position regarding SDLT would be that:
A. Yvonne would have no SDLT to pay
B. Yvonne would have to pay SDLT at 1% on the property value
C. Yvonne would have to pay SDLT at 1% on half of the mortgage amount
D. Yvonne would have to pay SDLT at 2% on half of the property value

Answer 53

A. Yvonne would have no SDLT to pay.
If one person gives another a consideration to become joint owner of a property, there would be a SDLT charge on the amount above the SDLT threshold of £125,000. A consideration would be a cash payment or taking on joint responsibility for an existing mortgage.
In this case, Yvonne’s threshold would be for £70,000 (half the existing mortgage), which is below the SDLT a threshold, so no SDLT would be payable.

Question 54

If a borrower did decide to apply for a second-charge loan rather than a further advance to their current mortgage, which of the following is true?
A. A second-charge holder can seek possession if the loan is in default
B. The existing mortgage lender never has a right to refuse to agree a second charge
C. The second-charge loan is likely to be at a lower interest rate than the existing mortgage
D. The second charge loan must end at the same time as the existing mortgage

Answer 54

A. A second-charge holder can seek possession if the loan is in default.
The second-charge holder can seek possession, but the first-charge holder would have priority when debts are repaid from the proceeds.
The second charge loan can be for any term agreed by the lender and borrower.

Question 55

For a brand new property, which of the following is correct in respect of the valuation options available to an individual buying through the Help to Buy Equity Loan Scheme?
A. A valuation is not necessary as the property is being purchased through the Help to Buy Equity Loan scheme
B. The lender is likely to insist on a RICS Condition Report because the property is brand new
C. The lender will only require a basic valuation to confirm the value for mortgage purposes and insurance reinstatement value
D. The lender will require either a RICS HomeBuyer Report plus a basic valuation, or a Building Survey

Answer 55

C. The lender will only require a basic valuation to confirm the value for mortgage purposes and insurance reinstatement value.

Question 56

Which of the following is correct in relation to the Help to Buy Equity Loan scheme?
A. It is only available on property valued up to £500,000
B. It is only available to first-time buyers
C. It requires a minimum deposit of 10% of the purchase price
D. Would not be available if the buyer opted for an ISA-linked mortgage

Answer 56

D. The Help to Buy Equity Loan scheme is only available for repayment mortgages.
The London variation of the scheme is available for property up to £600,000.
It is available to first-time and subsequent buyers.
It requires a minimum deposit of 5%.

Question 57

For a self-employed landscape gardener taking out a mortgage, within a full set of accounts, which specific document will best provide the figures required by the lender?
A. Balance sheet
B. Business plan
C. Cash flow statement
D. Profit and loss account

Answer 57

D. As the borrower has a full set of accounts, the profit and loss account would best provide the figures required.
The balance sheet is part of a full set of accounts, but the profit and loss account sets out a record of income and expenditure for the business for the trading year.

Question 58

Robert has a £35,000 share on a holiday home in Spain. He and his partner Jenny are considering buying their first main residence in England for £132,000. How much SDLT, if any, will they have to pay?
A. Nil
B. £140
C. £3,960
D. £4,100

Answer 58

B. £140.
Robert’s share on his property in Spain is below £40,000, so he was not liable for the 3% SDLT surcharge. However, as he owns a previous property and his new purchase is above the threshold, he and Jenny are liable for SDLT.
£132,000 - £125,000 = £7,000
£7,000 x 0.02 = £140

Question 59

If a lender proceeds with an interest only mortgage linked to an stocks and shares ISA repayment vehicle, how would any dividends be taxed?
A. All dividends would be paid gross but be taxable at 7.5%
B. Dividends above the dividend allowance would be taxed at 7.5%
C. Thy would be paid with a 10% tax credit that is not reclaimable, but the net dividend received would not be taxable
D. They would not be taxable

Answer 59

D. Dividends from shares in an ISA are not taxable.

Question 60

Andrew is 29 years old and has an interest-only mortgage supported by his personal pension plan. Under current rules, the earliest Andrew would be able to take his pension benefits to repay his mortgage would be in:
A. 21 years
B. 26 years
C. 28 years
D. 36 years

Answer 60

B. 26 years.
The earliest Andrew could take his mortgage is at the age of 55.
55 - 29 = 26 years

Question 61

What maximum level of tax relief, if any, would an individual receive on payments into their pension-linked mortgage repayment vehicle?
A. None
B. 20%
C. 25%
D. 40%

Answer 61

B. They would receive tax relief on their personal pension contributions at the basic rate of 20%.

Question 62

Once a lender becomes aware that a borrower is in arrears, they are required to write to them within:
A. 5 business days
B. 7 business days
C. 15 business days
D. 30 business days

Answer 62

C. They are required to write to them in 15 business days.

Question 63

Derek who is aged 45 and has been claiming Job Seeker’s Allowance for the past 3 months following his redundancy has a applied for Support for Mortgage Interest to help pay his mortgage interest (interest-only mortgage of £240,000). What is most likely to be the outcome of his application?
A. Declined due to his age
B. Accepted subject to a 39-week waiting period
C. Declined due to the amount of mortgage balance outstanding
D. Declined due to Derek’s state benefit eligibility

Answer 63

D. Derek was eligible for, and I’m receipt of, contribution-based Job Seeker’s Allowance. This is not an eligible benefit for Support for Mortgage Interest (SMI).

Question 64

Being on receipt of which of the following benefits would result in an application for Support for Mortgage Interest (SMI) being declined?
A. Contribution-based Job Seeker’s Allowance
B. Income-based Employment and Support Allowance
C. Income Support
D. Universal Benefit

Answer 64

A. Those in receipt of income-based ESA, Income Support, and Universal Credit can qualify for SMI. Contribution-based JSA is not a qualifying benefit.

Question 65

Carol has an interest-only mortgage supported by a unit-linked endowment policy of £80,000. She has 15 years until her redemption date and has been in arrears for the past 3 months following the loss of her job.
Carol’s adviser should point out that the least advantageous solution to her arrears problem is likely to be:
A. Capitalising the arrears
B. Making a single additional payment
C. Spreading the arrears
D. Surrendering the endowment policy

Answer 65

D. The possibility is that surrender would be uneconomical and this option is only used in cases of serious default, so this is the least advantageous solution for Carol.
Capitalising the arrears could be an option. There are still 15 years to run on the mortgage and - whole this would increase the capital - there should be plenty of time to fund the additional amount.