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41
fixed rate deal by switching from their priority of charges, not to the term of a existing rate, the borrower will not benefit
variable rate mortgage. They will not raise mortgage. immediately as he has had to pay £750
any additional capital and the mortgage B - If the original mortgage deed did not oblige costs.
would represent 82% LTV compared to the the lender to make subsequent loans, and a B - At 4 months on the new rate, the borrwer
original 94%. Which of the following would second charge has been established, the will have paid £120,000 @ 5% ÷ 3 = £2,000 +
be true of their proposed action? original lender may wish to set this aside. £750 for the costs. On the existing rate he
A - It is likely to be less costly to arrange This is achieved by a deed of posponement. will only have paid £120,000 @6.5% ÷ 3 =
than a remortgage. C - A second charge is made by a further £2,600
B - The switch is likely to be cost free. lender and the first charge will remain in C - The cost of the existing arrangement over 6
C - They may have to pay another higher place. No deed of postponement will be months is £120,000 @ 6.5% = £7,800 ÷ 2 =
lending charge. required. £3,900. The cost of the new loan over 6
D - They would have to allow for D - Deeds of postponement relate to the months is £120,000 @ 5% = £6,000 ÷ 2 =
conveyancing costs. priority of charges, not to the original £3,000 + £750 initial costs.
borrowers. D - At 13 months on the new rate the borrower
10.What is the position when a joint borrower Q4 - Correct answer: D will have paid (£120,000 @ 5%)/12 x13 =
wishes to be released from his commitment A - As a second mortgage ranks behind the £6,500 + £750 costs. This will be cheaper
due to an impending divorce? The lender: first charge as a priority against the than the existing rate but it is not the
A - cannot refuse under any circumstances. property, it can be registered without earliest point.
B - is likely to refuse if it believes that the consent. Q8 -Correct answer: D
remaining borrower will be unable to B - If the first mortgagee sells in possession, it A - As circumstances are always fluid, there
meet the mortgage repayments. will take what is owed to it and the balance would be no reason for the lender's checks
C - should recommend the remaining will initially be available to the holder of the to be any less stringent.
borrower move to a cheaper property. second charge. B - The existence of life policies is independent
D - will not be able to act until the decree C - The rates of interest are not linked. As a of mortgage arrangements, even if used in
absolute is obtained. second charge is a higher risk, it will conjunction with them.
normallly carry a higher interest rate. C - The higher lender charge (Mortgage
ANSWERS & JUSTIFICATIONS
D - As a second charge is a higher risk than a Indemnity Guarantee single payment) is not
first charge it will normally carry a higher refundable.
interest rate. D - Moving home is an expensive exercise,
Q1 -Correct answer: B
Q5 - Correct answer: B including costs for solicitors, surveys and
A - It would in fact be true to say that, under a
A - There seems to be no reason for a other mortgage-related costs.
home reversion scheme, the money raised
requirement of any type of bridging finance Q9 -Correct answer: A
is on a discounted basis to the value of the
here. No property is being purchased by A - Whilst lenders often impose charges when
property, which cannot be described as an
the seller of the land. borrowers switch from their existing deal, it
advantage.
B - Open bridging applies when a purchaser of is still likely to be cheaper than going
B - No interest is paid or charged on a home
a new property has yet to find a purchaser through the full purchase process and costs
reversion plan. The reversion provider
for the existing property, but intends to with a new lender.
takes part, or all, of the property into
proceed immediately. B - Lenders often impose charges when
ownership in exchange for the funds
C - Closed bridging would apply where an borrowers switch from their existing deal,
provided.
existing property already has achieved a such as arrangement fees, early
C - Under home reversion plans, ownership is
firm buyer. redemption charges and a valuation fee.
transferred and the ceding owner (the
D - There is no evidence that Mary is selling an C - As they are staying with their eixsting
'planholder') will not benefit from future
existing property, so bridging does not lender, Harry and Rebecca would not be
increases in value.
appear to be an issue. expected to pay a further higher lending
D - Under both home reversion schemes and
Q6 -Correct answer: B charge.
home income plans, the plan holder can
A - Tacking relates to charges against a D - As there is no change of lender, any charge
stay in the property for life.
property where there are multiple loans. imposed by the lender would not relate to
Q2 - Correct answer: B
The way interest is calculated is not additional conveyancing costs.
A - It is under home reversion plans where
relevant. Q10 -Correct answer: B
ownership is transferred, not home income
B - Drawdown allows further tranches of A - If a joint borrower wishes to be released
plans.
money to be taken by the borrower, from a mortgage contract, the lender has
B - Any income or capital arising from home
eliminating the need for multiple borrowing the right to the final say as to whether this
reversion plans or lifetime mortgages,
and priority of charges to which tacking is acceptable or not.
including home income plans, can impact
relates. B - The lender's primary interest is that the
on State benefits, e.g. Pension Credit.
C - Early repayment charges relate to mortgage continues to be serviced. If the
C - SHIP compliant lifetime mortgages,
payments contracted with the borrower, to lender has doubts about the remaining
including home income plans, contain a no
be made if a loan is repaid early. Tacking borrower achieving this, then the request
negative equity guarantee.
relates to charges against a property where for release is likely to be refused.
D - As ownership is not transferred under
there are multiple loans. C - Whilst this may or may not be a solution for
lifetime mortgages, including home income
D - Fixed rates of interest are not relevant. the borrower, the lender's interest relates
plans, the continuing owner, the
The tacking is concerned with changed primarily to ensuring the existing mortgage
planholder, will enjoy the right to increases
priorities where multiple loans are taken is properly serviced.
in the property value.
out. D - The lender is guided by the financial
Q3 -Correct answer: C
Q7 -Correct answer: C realities and is not obliged legally to await
A - Deeds of postponement relate to the
A - Even though the new rate is lower than the the decree absolute.
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