Unit 6:27 Changing Mortgage Terms

Question 1

Mortgage switching considerations

Answer 1

• Application and/or product fees will apply for the new mortgage deal
• Early repayment charges might apply to the existing mortgage
• Switching products with the original lender typically involves fewer complications and costs

Question 2

Pre-2014 mortgages and affordability assessments

Answer 2

• Mortgages taken out before 26th April 2014 are non-MCD regulated and don’t require new affordability assessments
• Lenders can waive new affordability checks and use proportionate assessment for existing customers
• This exemption applies only if borrowers are up to date with their mortgage payments

Question 3

Mortgage switching process roles

Answer 3

• Lenders will perform affordability checks for all mortgage switches, even when staying with the same provider
• Mortgage payment history and arrears status are key factors in these assessments
• Solicitor handles the legal aspects, paying off existing mortgage and managing fees during the transition

Question 4

Borrower considerations for mortgage switching

Answer 4

• Terms and Conditions: Review the full details of the new mortgage agreement
• Fees and other costs: Account for application fees, early repayment charges, and legal costs
• Debt consolidation: Consider whether combining other debts with mortgage is appropriate (longer interest payments)

Question 5

Property movers considerations

Answer 5

• Charges: Compare all fees associated with moving a mortgage to a new property
• Standard of Service: Evaluate the lender’s customer service and support quality
• Interest rates: Compare rates across lenders to ensure competitive terms
• Portability: Check if current mortgage can be transferred to a new property

Question 6

Equity transfer

Answer 6

• Occurs when a joint owner transfers their share of the property to the other owner’s sole name
• Can also happen when a sole owner adds another person as joint owner
• Transfer of equity must be agreed by all owners, who then arrange for a solicitor to register the transfer at the Land Registry

Question 7

Lender assessment criteria

Answer 7

• Purpose of the request (The Why): Reason for changing mortgage terms
• Financial status (The How): Borrower’s current income and affordability
• Value of the property (The Where): Current market valuation and equity position
• Any person aged 17+ who lives in or will move into the property after equity transfer, but will not be a joint owner, must complete a ‘Consent to Mortgage’ form

Question 8

Regulatory considerations (MCOB 7.6)

Answer 8

• When adding a party to a mortgage contract, the lender must provide them with an ESIS for the whole loan
• The ESIS must meet pre-application disclosure requirements as specified in MCOB 5
• This ensures new parties receive full information about the entire mortgage obligation they’re joining

Question 9

Mortgage Exit Fees (£50)

Answer 9

• Fee charged by lenders to cover costs of closing accounts and completing required procedures when borrowers redeem mortgages

Question 10

Acceptable Lender Charges When Paying off Mortgage

Answer 10

• Deed release Fee
• Land Registry Charge
• Staff processing costs
• Reasonable proportion of general overhead

Question 11

Part-redemption

Answer 11

• When a borrower pays a lump sum to reduce their mortgage balance outside of regular payments
• Allows borrowers to decrease overall debt, potentially reducing interest payments and shortening the mortgage term

Question 12

New MCOB Rules

Answer 12

• Changes only apply to 1st legal charge residential mortgages and home purchase plans
• Any reduced payment option will be offered on an execution only basis
• The lender must disclose the changes including amounts and new payments