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Training
9.Katherine wishes to convert her capital
existing rate, the borrower will not Q7 - Correct answer: C
repayment mortgage to an interest only
benefit immediately as he has had to pay A - Many lenders offer a portability option,
mortgage. Which of the following
£750 costs. where an existing mortgage can be
statements is correct?
B - At 4 months on the new rate, the borrwer transferred to a new property during the
Her lender:
will have paid £120,000 @ 5% ÷ 3 = £2,000 initial term without penalty, providing the
A - can refuse the request only if there are
+ £750 for the costs. On the existing rate same terms and conditions apply.
arrears outstanding on the loan.
he will only have paid £120,000 @6.5% ÷ 3 B - Many lenders offer a portability option,
B - can refuse the request unless Katherine
= £2,600 where an existing mortgage can be
provides details of how she will pay off
C - The cost of the existing arrangement transferred to a new property during the
the loan.
over 6 months is £120,000 @ 6.5% = initial term without penalty, providing the
C - is not obliged to agree to the request.
£7,800 ÷ 2 = £3,900. The cost of the new same terms and conditions apply.
D - must accede to Katherine's request
loan over 6 months is £120,000 @ 5% = C - Many lenders offer a portability option,
whatever the circumstances.
£6,000 ÷ 2 = £3,000 + £750 initial costs. where an existing mortgage can be
D - At 13 months on the new rate the transferred to a new property during the
10.Which of the following is true in relation
borrower will have paid (£120,000 @ initial term without penalty, providing the
to a transfer of equity?
5%)/12 x13 = £6,500 + £750 costs. This same terms and conditions apply.
A - A transfer of equity can take place only
will be cheaper than the existing rate but D - Many lenders offer a portability option,
once during the lifetime of a mortgage
it is not the earliest point. where an existing mortgage can be
contract.
Q4 - Correct answer: D transferred to a new property during the
B - It is not an effective way for the person
A - As circumstances are always fluid, there initial term without penalty, providing the
transferring to avoid creditors.
would be no reason for the lender's same terms and conditions apply.
C - Most requests for a transfer of equity
checks to be any less stringent. Q8 -Correct answer: B
are originated by the mortgage lender.
B - The existence of life policies is A - As David and Frances intend moving only
D - The final decision on whether a
independent of mortgage arrangements, a very short distance, the issue of
transfer of equity will occur rests with
even if used in conjunction with them. schooling should remain unchanged.
the borrower.
C - The higher lender charge (Mortgage B - Moving costs are significant. David and
Indemnity Guarantee single payment) is Frances need to be certain that these are
ANSWERS & JUSTIFICATIONS
not refundable. fully justified.
D - Moving home is an expensive exercise, C - As David and Frances intend moving only
including costs for solicitors, surveys and a very short distance, the local facilities
Q1 -Correct answer: B
other mortgage-related costs. will be the same.
A - There seems to be no reason for a
Q5 - Correct answer: A D - As David and Frances intend moving only
requirement of any type of bridging finance
A - Whilst lenders often impose charges a very short distance, they will
here. No property is being purchased by
when borrowers switch from their presumably be staying in the same Local
the seller of the land.
existing deal, it is still likely to be Authority area.
B - Open bridging applies when a purchaser of
cheaper than going through the full Q9 -Correct answer: C
a new property has yet to find a purchaser
purchase process and costs with a new A - In any event, there is no obligation on
for the existing property, but intends to
lender. Katherine's lender to convert the existing
proceed immediately.
B - Lenders often impose charges when agreed mortgage.
C - Closed bridging would apply where an
borrowers switch from their existing B - In any event, there is no obligation on
existing property already has achieved a
deal, such as arrangement fees, early Katherine's lender to convert the existing
firm buyer.
redemption charges and a valuation fee. agreed mortgage.
D - There is no evidence that Mary is selling an
C - As they are staying with their eixsting C - In any event, there is no obligation on
existing property, so bridging does not
lender, Harry and Rebecca would not be Katherine's lender to convert the existing
appear to be an issue.
expected to pay a further higher lending agreed mortgage.
Q2 - Correct answer: B
charge. D - In any event, there is no obligation on
A - Tacking relates to charges against a
D - As there is no change of lender, any Katherine's lender to convert the existing
property where there are multiple loans.
charge imposed by the lender would not agreed mortgage.
The way interest is calculated is not
relate to additional conveyancing costs. Q10 -Correct answer: B
relevant.
Q6 -Correct answer: B A - If a joint borrower wishes to be released
B - Drawdown allows further tranches of
A - If a joint borrower wishes to be released from a mortgage contract, the lender has
money to be taken by the borrower,
from a mortgage contract, the lender has the right to the final say as to whether
eliminating the need for multiple
the right to the final say as to whether this is acceptable or not.
borrowing and priority of charges to which
this is acceptable or not. B - The lender's primary interest is that
tacking relates.
B - The lender's primary interest is that the the mortgage continues to be serviced.
C - Early repayment charges relate to
mortgage continues to be serviced. If the If the lender has doubts about the
payments contracted with the borrower, to
lender has doubts about the remaining remaining borrower achieving this, then
be made if a loan is repaid early. Tacking
borrower achieving this, then the request the request for release is likely to be
relates to charges against a property
for release is likely to be refused. refused.
where there are multiple loans.
C - Whilst this may or may not be a solution C - Whilst this may or may not be a solution
D - Fixed rates of interest are not relevant.
for the borrower, the lender's interest for the borrower, the lender's interest
The tacking is concerned with changed
relates primarily to ensuring the existing relates primarily to ensuring the existing
priorities where multiple loans are taken
mortgage is properly serviced. mortgage is properly serviced.
out.
D - The lender is guided by the financial D - The lender is guided by the financial
Q3 -Correct answer: C
realities and is not obliged legally to realities and is not obliged legally to
A - Even though the new rate is lower than the
await the decree absolute. await the decree absolute.
December 2009 Mortgage Introducer www.mortgageintroducer.com
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