Unit 6 - Topic 25 Flashcards
Schemes for specific groups of borrower
Lifetime mortgages have been arranged for a 60-year old and a 75-year old. Which of the following is correct ? (25.8)
A. The 60-year old can release more equity
B. The 60-year old is likely to pay less interest
C. The 75-year old can release more equity
D. The 75-year old is likely to pay more interest
C. The 75-year old can release more equity
The age of the borrower doesn’t affect the interest rate, but it does affect the amount of equity that can be released. The older the client, the larger percentage can be released.
Brigitte has just taken out a hybrid lifetime mortgage, which means that : (25.8.1)
A. the lender isn’t required to carry out an affordability assessment
B. the arrangement comprises part-reversion and part-lifetime mortgage.
C. the mortgage is part-repayment and part interest-only
D. reduced payments are permitted.
A. the lender isn’t required to carry out an affordability assessment
In the case of hybrid arrangements, the lender is not required to carry out an affordability assessment when the mortgage is arranged, because the borrower can switch to an interest roll-up basis if and when they choose.
Nigel has taken out a new mortgage that requires him to pay monthly rent, as well as mortgage payments. What type of mortgage does he have? (25.1)
A. Deferred interest
B. Shared ownership
C. Equity share
D. LIBOR
B. Shared ownership
The buyer arranges a conventional mortgage via the scheme provider’s partner lender to buy their share. The buyer pays rent to the provider; the amount is based on the value of the part retained by the provider
With an equity share scheme, the borrower arranges a mortgage on an agreed proportion of the property. Who takes an equity stake in the balance? (25.2)
A. The scheme provider
B. The freeholder
C. The guarantor
D. The housing association
A. The scheme provider
The borrower will be the legal owner of the whole property and will pay a deposit
and arrange a conventional first-charge mortgage on an agreed proportion of the
property. The scheme provider will take an equity stake in the balance of the property
price through a second charge
Dora has been renting her council house for the past 12 years. Under the Right-To-Buy scheme to what overall discount is she entitled? (25.5)
A. 35%
B. 42%
C. 60%
D. 64%
B. 42%
Dora qualifies for a discount as follows:
35% after 5 years + 1% for each additional year = 35 + 7 = 42%
The Equity Release Council Code of Practice provides which of the following safeguards ? (25.9.1)
A. Early repayments can be made at any time
B. interest must be calculated on a daily basis
C. Interest charged is never more than 3% above Bank of England base rate
D. A no-negative equity guarantee from the provider
D. A no-negative equity guarantee from the provider
The provider gives a ‘no negative equity’ guarantee, ie the amount that has to be repaid will not be more than the price obtained when property is sold
Bob is selling his property after purchasing it under the Right To Buy scheme two years ago. What is the position regarding the discount Bob received ? (25.5.1)
A. He can transfer the discount to a new property
B. The discount he received must be repaid in full
C. A percentage of the discount he received must be repaid
D. The discount he received does not have to be repaid
C. A percentage of the discount he received must be repaid
If the tenant sells the property within a certain period, some, or all, of the discount may be repayable
Bhavin completed a full home reversion scheme two years ago; he has just been turned down
for a further advance, even though the property value has increased by 40%. This is because (25.9)
A. Bhavin is now 76 years of age
B. Bhavin doesn’t own the property any more
C. The interest payments are taking up most of his annuity income
D. The loan-to-value is too high.
B. Bhavin doesn’t own the property any more
The clue in this question is in the word ‘full’ which indicates that Bhavin has arranged a full reversion on his property and the reversion company now owns 100% of his property. Despite an increase in the property’s value, Bhavin cannot benefit.
Under a home reversion scheme, Jack took out a 50% reversion scheme when his property was valued at £200,000. His property is now valued at £600,000. What amount, if any, would be paid to his estate if he died ? (25.9)
A. Nil
B. £150,000
C. £300,000
D. £100,000
C. £300,000
In the case of partial reversion, where only part of the property is entered into the plan, the provider usually takes full legal title to the property, but the previous owner becomes the beneficial owner of the part they retain. Jack has retained a 50% stake in the value of his property.
Which of the following statements is true in relation to the Help To Buy Equity Loan scheme in London? (25.3.2)
A. Buyers must have a minimum cash deposit of at least 10%
B. The maximum loan is 45% of the full purchase price
C. The government loan is available on property valued up to £600,000
D. The purchaser must be able to fund at least 50% of the purchase price
C. The government loan is available on property valued up to £600,000
The available government loan for the London scheme is for the purchase of property valued up to £600,000
Not A = Buyers must have a minimum 5% cash deposit
Not B = The available loan is up to 40% of the purchase price
Not D = The purchaser must fund at least 60% of the purchase price
