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Training
vendor. This means that Felicity is likely to: whole amount. This answer assumes 1% B - Higher lending charges relate to the loan-
A - be forced to take over the agreement. on the whole £287,000. to-value ratio. It is not a protection for
B - be turned down by most lenders. B - The correct rate of SDLT is 3% on the poor credit risk.
C - only be eligible for a commercial whole amount. This answer assumes the C - Higher lending charges relate to the loan-
mortgage. first £175,000 @ 0% and the balance of to-value ratio and not to any specific
D - pay a premium price for the flat. £112,000 @3%. income criteria.
C - This is correct with the 3% SDLT rate D - Higher lending charges may be imposed
9. Which of the following is true of the applied to the whole purchase price of where the loan-to-value ratio exceeds a
'reinstatement value' of a property? £287,000 (£287,000 @ 3% which is certain level, usually 75% or greater.
A - It is the amount the insurer will pay in £8,610).
the event of theft or damage. D - The correct rate of SDLT is 3% on the Q8 - Correct answer: B
B - It is usually about the same as the whole amount. This answer assumes 4% A - Most lenders will want vacant possession,
property's market value. on the whole £287,000 which is £11,480. which means that they will have
C - It represents an estimate of the cost of unrestricted use of the property and no
rebuilding the property. Q4 - Correct answer: C (sitting) tenants. Few lenders will lend on
D - It will be established by the insurer. A - Environmental searches check for a properties without vacant possession.
history of flooding, mining subsidence, B - Most lenders will want vacant possession,
10. Which of the following factors is least likely radon gas, etc. Local Authority searches which means that they will have
to affect a property as security from a relate to planned development. unrestricted use of the property and no
lender's perspective? B - Environmental searches check for a (sitting) tenants. Few lenders will lend on
A - A flat is part of a 'multiple use' property. history of flooding, mining subsidence, properties without vacant possession.
B - The age of the property. radon gas, etc. Local Authority searches C - Most lenders will want vacant possession,
C - The existence of a Zurich Municipal relate to planned development. which means that they will have
insurance policy rather than the NHBC C - Environmental searches check for a unrestricted use of the property and no
scheme. history of flooding, mining subsidence, (sitting) tenants. Few lenders will lend on
D - The walls are of pre-cast concrete. radon gas, etc. Local Authority searches properties without vacant possession.
relate to planned development. D - Most lenders will want vacant possession,
D - Environmental searches check for a which means that they will have
ANSWERS & JUSTIFICATIONS
history of flooding, mining subsidence, unrestricted use of the property and no
radon gas, etc. Local Authority searches (sitting) tenants. Few lenders will lend on
relate to planned development. properties without vacant possession.
Q1 - Correct answer: C
A - A collateral deposit is usually a sum of
Q5 - Correct answer: D Q9 - Correct answer: C
money put up as additional security and
A - £40 would be payable on a property worth A - The reinstatement value of a property is
held by the lender.
£50,000. The fee on a property over £1m the valuer's estimate of the cost of
B - A collateral deposit is held until the debt
would be £700. rebuilding the property from scratch in
is repaid. It will not be used to support
B - The fee on a property over £1m would be the event of destruction by fire or a
periodic repayments.
£700. similar catastrophe.
C - A collateral security is a sum of money
C - The fee on a property over £1m would be B - The reinstatement value of a property is
deposited with the lender and is held until
£700. the valuer's estimate of the cost of
the debt is repaid.
D - The fee on a property over £1m would be rebuilding the property from scratch in
D - A collateral deposit is, itself, an additional
£700. the event of destruction by fire or a
security. It is not, itself, secured against
similar catastrophe.
the mortgage.
Q6 - Correct answer: B C - The reinstatement value of a property is
A - Title indemnity is required where the title the valuer's estimate of the cost of
Q2 - Correct answer: C
cannot be fully guaranteed. It protects the rebuilding the property from scratch in
A - Depositing an endowment policy
owner and the lender from ownership the event of destruction by fire or a
document does not create a legal right to
claims made by other parties. similar catastrophe.
the lender to benefit from the proceeds.
B - Title indemnity is required where the title D - The reinstatement value of a property is
It creates an equitable right evidencing an
cannot be fully guaranteed. It protects the the valuer's estimate of the cost of
agreement between the parties.
owner and the lender from ownership rebuilding the property from scratch in
B - An assignment is the legal method of
claims made by other parties. the event of destruction by fire or a
transfer from the insured to the lender.
C - Title indemnity is required where the title similar catastrophe.
C - As an alternative to a formal assignment,
cannot be fully guaranteed. It protects the
some lenders will accept an endowment
owner and the lender from ownership Q10 - Correct answer: C
assurance document being deposited with
claims made by other parties. A - A property not given over totally to
them. This creates an equitable right
D - Title indemnity is required where the title residential use can clearly impact on the
evidencing as agreement between the
cannot be fully guaranteed. It protects the lender's security.
parties.
owner and the lender from ownership B - The age of a property is clearly an issue
D - An endowment assurance can be
claims made by other parties. for ongoing lender security.
expected to have a surrender value in
C - In principle, the Zurich Municipal and the
well under 5 years. Often in the 18
Q7 - Correct answer: D NHBC schemes are very similar in the
months to 2 year time frame.
A - Higher lending charges are imposed security offered.
where the loan-to-value ratio exceeds a D - Pre-cast concrete is a building medium
Q3 - Correct answer: C
certain level irrespective of the mortgage which is always a concern to lenders
A - The correct rate of SDLT is 3% on the
amount. because of its propensity to deteriorate.
September 2009 Mortgage Introducer www.mortgageintroducer.com
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