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Training
8. In which of the following transactions is the
be calculated on the net amount hence available only to borrowers over a certain
lender least likely to use the applicant's
£150,000 less £15,000 = £135,000 @ 6.5% = age, as defined by the lender.
income from employment in determining
£8,775. £9,750 makes no allowance for the D - Lifetime mortgages are defined as those
how much to lend?
offsetting amount of £15,000. available only to borrowers over a certain
A - Brian, who is purchasing a property on a
Q3 - Correct answer: B age, as defined by the lender.
shared ownership basis.
A - Daily interest calculation and no MIG fees Q7 - Correct answer: D
B - Dean, who is purchasing his flat from his
apply to all CAT mortgages. The A - The security of the property concerned
landlord, the local authority
arrangement fee for a fixed rate mortgage under usual circumstances will offer
C - Emma, who is purchasing a property
cannot exceed £150. The lender can charge sufficient security for a low start mortgage.
with a buy-to-let mortgage.
an early repayment charge within limits B - A low start mortgage is usually a defined
D - Lisa, who is purchasing a small house
B - Daily interest calculation and no MIG fees lender offer on terms determined by them.
with an equity share mortgage.
apply to all CAT mortgages. The lender can C - Under a low start mortgage there is no
charge an early repayment charge within roll-up, and capitalisation of the unpaid
9. Nigel has taken out a new mortgage that
limits interest portion unlike a deferred interest
requires him to pay monthly rent as well as
C - Daily interest calculation and no MIG fees mortgage.
mortgage payments. What type of mortgage
apply to all CAT mortgages. The D - Under low start mortgages, the mortgage
does he have?
arrangement fee for a fixed rate mortgage is interest-only at least for the agreed low
A - Deferred interest.
cannot exceed £150. The lender can charge start period, but then usually moves to
B - Equity share.
an early repayment charge within limits capital repayment.
C - LIBOR.
D - The lender can charge an early repayment Q8 - Correct answer: C
D - Shared ownership.
charge within limits. Daily interest A - A lender will usually consider the
calculation and no MIG fees apply to all applicant's income when lending on a share
10. . Which of the following statements is
CAT mortgages. The arrangement fee for a ownership basis, as it is from income that
correct in respect of Sharia-compliant
fixed rate mortgage cannot exceed £150. repayments will be paid.
mortgages?
Q4 - Correct answer: C B - A lender will usually consider the
A - Only the ljara method involves the
A - Fixed rate mortgages commonly have early applicant's income under a right-to-buy
payment of interest to the lender.
redemption penalties. mortgage as it is from income that
B - The Murabaha method involves the
B - The selection of a fixed rate should not repayments will be paid.
payment of rent to the lender.
influence the overall mortgage repayment C - As it is expected that rental income will pay
C - Under the ljara method, the lender
period. the mortgage payments on a buy-to-let
purchases the property and immediately
C - Because rates are fixed for a pre-agreed property, the applicant's income is of less
sells it to the applicant.
period the mortgage is, for that time, free importance.
D - Under the Murabaha method, the
from the impact of interest rate D - A lender will usually consider the
property is purchased by the lender and
movements. applicant's income when lending on an
sold to the applicant at a higher price.
D - The borrower's state of health will not equity share mortgage as it is from income
have a significant impact on the choice that payments will be paid.
ANSWERS & JUSTIFICATIONS
between fixed and variable rate Q9 - Correct answer: D
mortgages. A - Deferred interest mortgages entail the full
Q5 - Correct answer: D purchase of the property so no rent will be
Q1 - Correct answer: C
A - Commercial mortgages are available to paid.
A - Under a roll-up facility no interest is paid
those who wish to purchase non- B - Equity share mortgages offer a reduction in
until the property is sold.
residential property. The borrower could the effective interest rate or payment in
B - Lifetime mortgages are designed to cease
be an individual, a partnership or a exchange for the lender retaining a
at death or when the owner enters long
company. proportion of the equity when the property
term care. They are not expected to have a
B - Commercial mortgages are available to is sold.
capital repayment vehicle in place other
those who wish to purchase non- C - A LIBOR mortgage usually entails the full
than the property value.
residential property. The borrower could purchase of a property with no rent to be
C - No interest is paid but is accumulated and
be an individual, a partnership or a paid.
repaid from the proceeds of the property
company. D - Shared ownership entails partial purchase
sale, often on death of the owner.
C - Commercial mortgages are available to of a property with rent to be paid on the
D - SHIP offers a no negative equity guarantee.
those who wish to purchase non- remaining part.
Q2 - Correct answer: A
residential property. The borrower could Q10 - Correct answer: D
A - Under an offset mortgage the interest will
be an individual, a partnership or a A - Only rent and capital are paid under the
be calculated on the net amount hence
company. Ijara method.
£150,000 less £15,000 = £135,000 @ 6.5% =
D - Commercial mortgages are available to B - No rent is paid under the Murabaha
£8,775.
those who wish to purchase non-residential method, which involves only payment of
B - Under an offset mortgage the interest will
property. The borrower could be an capital based on the price of sale from
be calculated on the net amount hence
individual, a partnership or a company. lender to buyer.
£150,000 less £15,000 = £135,000 @ 6.5% =
Q6 - Correct answer: D C - Under the Ijara method, the bank buys the
£8,775.
A - Lifetime mortgages are defined as those property and enters into a 'promise to
C - Under an offset mortgage the interest will
available only to borrowers over a certain purchase' a agreement by which the buyer
be calculated on the net amount hence
age, as defined by the lender. pays capital and rent over the term.
£150,000 less £15,000 = £135,000 @ 6.5% =
B - Lifetime mortgages are defined as those D - Under the Murabaha method, the bank
£8,775. £9,075 assumes £150,000 @ 6.5%
available only to borrowers over a certain buys the property at an agreed price and
less £15,000 @ 4%.
age, as defined by the lender. then sells it immediately to the client at a
D - Under an offset mortgage the interest will
C - Lifetime mortgages are defined as those higher price.
October 2009 Mortgage Introducer www.mortgageintroducer.com
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