Unit 6 - Topic 26 Flashcards
Raising additional funds from property
A mortgage deed that obliges the lender to make further advances: (26.3.1)
A. will result in other lenders being unable to take a charge over the property.
B. will require a subsequent mortgagee to execute a deed of postponement.
C. means that borrowers can only apply to their original lender for an advance.
D. means that further advances will take priority over other lenders’ charges
D. means that further advances will take priority over other lenders’ charges
If the mortgage deed obliged the first-charge holder to make further advances, then a deed of postponement is not required. The word ‘obliged’ in this context could perhaps be interpreted as ‘allowed’ or ‘required’.
In which of the following circumstances would ‘closed bridging’ be appropriate ? (26.8)
A. For Jane, who wishes to purchase a property before a buyer has been found for her existing property.
B. For Louise, who has exchanged contracts on the sale of her existing property and wishes to complete her purchase on another property before the sale.
C. For Marie, who wishes to purchase a plot of land on which to build her new home.
D. For John, who has exchanged contracts on the sale of part of the land adjoining his property.
B. For Louise, who has exchanged contracts on the sale of her existing property and wishes to complete her purchase on another property before the sale.
Typically, closed bridging is where the borrower has a confirmed plan for the sale of
the existing property and it requires the borrower to have a firm buyer. Closed bridging usually starts at or just after exchange of contracts.
Maureen is setting up a full home reversion scheme to raise additional funds. Which of the following would be seen as a disadvantage for her? (Table 26.2)
A. There is little control over the increasing debt
B. Not all providers give a no-negative equity guarantee
C. Maureen would lose all rights to any increase in the value of the property.
D. The scheme will provide less cash than a lifetime mortgage.
C. Maureen would lose all rights to any increase in the value of the property.
A deed of postponement might be necessary if: (26.3.1)
A. a borrower wishes to extend the term of his mortgage
B. a mortgage contract does not contain an obligation for the lender to make further advances
C. a property owner wishes to arrange a second mortgage
D. one party wishes to be removed from a mortgage
B. a mortgage contract does not contain an obligation for the lender to make further advances
If the lender’s mortgage deed doesn’t contain an obligation to make further advances, then a deed of postponement may be required if there is already a second charge and a further advance has been requested. Just applying for a second mortgage wouldn’t necessitate a deed of postponement.
In relation to a further advance on an existing MCD-regulated mortgage, in order to comply with MCOB rules, the lender must provide the borrower with: (26.4)
A. an ESIS based on the further advance only.
B. an illustration based on the further advance only.
C. an ESIS based on the total borrowing.
D. an illustration based on the total borrowing.
A. an ESIS based on the further advance only.
For an MCD-regulated mortgage that requires the lender to approve further advances, an ESIS must be given to the borrower which is based on the further advance only.
What is the most likely reason for a lender requiring a new valuation when a borrower applies for a further advance? (26.2.2)
A. The original loan to value was high
B. The original loan to value was low
C. The unexpired mortgage term is less than 25 years
D. The original mortgage was subject to a retention
A. The original loan to value was high
If the original loan-to-value was high, a new valuation may be needed to determine whether the property offers sufficient security for the higher borrowing commitment.
George and Jean would like to raise the maximum available capital sum from their home, which they own outright and are considering lifetime mortgages and home reversion plans.
Both plans meet the Equity Release Council’s code of practice. What is an advantage offered by the home reversion plan, compared with the mortgage-based scheme ? (Table 26.2)
A. Increases in the couple’s income or capital will not affect State benefits.
B. The amount owed will never exceed the value of the property.
C. They will probably be able to receive more cash.
D. They will retain ownership of the property
C. They will probably be able to receive more cash.
Not A = A potential disadvantage of both types of equity release is that increases in income or capital resulting from the scheme may affect eligibility for means-tested benefits, such as Income Support, Pension Credit and Council Tax Reduction.
Not B = There is no loan.
Yes C = A larger cash payment is usually available with a reversion scheme
Not D = George and Jean will not retain property ownership with a reversion scheme.
Which of the following statements regarding bridging finance is true ? (26.8)
A. Closed bridging finance is less risky than open bridging finance
B. Closed bridging finance is more expensive than open bridging finance
C. Open bridging finance is no more risky than closed bridging finance
D. Open bridging finance is only appropriate if a client has exchanged contracts on their existing property
A. Closed bridging finance is less risky than open bridging finance
Closed bridging is seen as less risky than open bridging because the borrower has a firm buyer in place,
MCOB 4.7 sets out the requirements for lenders when advising a customer who is applying for a bridging loan. Which of the following is not a requirement? (26.9.1)
A. To offer the customer a choice of interest rate options
B. To consider whether it’s appropriate for the customer to make regular payments.
C. For the customer to demonstrate that a credible repayment strategy is in place for the repayment of the bridging loan.
D. To consider whether a normal mortgage might be more appropriate for the customer
A. To offer the customer a choice of interest rate options
It’s not a requirement for the lender to offer a range of interest rate options
The priority of two legal mortgages on the same property, is determined by : (26.3.1)
A. Their date of registration
B. The size of the loan
C. The type of mortgage deed
D. The completion date
A. Their date of registration
The order of priority of charges (i.e. who gets paid first) depends on the date the loan was registered at the Land Registry.
