Mortgages

Question 1

Questions if moving to new house in future (8)

Answer 1

What deposit required
-Continue with repayment or interest only
-Continue with investment as repayment vehicle
-How much of a mortgage do you think you’ll require?
-ATR/CFL/tolerance etc
-Will this deposit come from selling the house? Or other?
-Affordability-how much can afford a month in mortgage payments
-years of accounts

Question 2

Describe joint tenancy (2)

Answer 2

-equal share
-no one person can sell without the other

Question 3

Describe tenants in common (2)

Answer 3

-Goes to probate to be distributed on death
-can sell at any point

Question 4

How do you force a sale as tenants in common?

Answer 4

Apply to the court for order for sale

Question 5

What are the interest types for repayment mortgages? (7)

Answer 5

-Standard variable-set by lender-move inline with prevailing rates
-Tracker-tracks BOE
-Fixed rate-reverts to variable after term
-Discounted-standard variable with discount applied. Reverts afterward
-Offset- money in savings reduces overall debt //wont get interest from savings though//
-Capped-wont rise above
-cap and collar-below or above

Question 6

What questions would you ask regarding the capital element of someones mortgage in the fact find?(6)

Answer 6

-When would you like to repay the debt?
-what term
-Under whos name
-Amount
-Any early repayment charges?
-Full details of investment plan to repay (if IO)

Question 7

What questions would you ask regarding the interest element of a clients mortgage in the fact find? (4)

Answer 7

-What rate?
-Type of interest rate
-if fixed/discounted-if so, for how long
-Rules in relation to loan itself-overpayment cap etc

Question 8

What questions would you ask regarding the debt element of the clients mortgage during the fact find? (11)

Answer 8

-total
-amount pm
-protection in place, if not, do they want to consider?
-if not, whats the plan if x
-plan to repay mortgage
-do they want to make capital repayments?
-other loans/debts?
-use of existing investments for repayment
-future inheritances
-help from family eg. Financial or if get unwell etc
-ATR on this debt
-affordability/budget

Question 9

General questions to ask around mortgages (6)

Answer 9

How will it be repaid (if IO)
What is investment vehicle
Redemption penalities (if need to move, does it keep with current lender)
Right type of mortgage (low interest, fixed, discounted)
Any other investments/capital to ise
Costs of remortgaging -feess and legal costs (need to weigh up against longer term monthly mortgage savings

Question 10

Who does interest only mortgages
Suit best?

Answer 10

Those with high ATR. With a means to repay

Question 11

Considerations for a repayment mortgage (14)

Answer 11

-what is the term
-what interest type (fixed, variable)
-mortgage costs/legal costs
-current budget/affordability
-age and health
-underwriting
-inheritances due?
-other assets
-mortgage sickness cover
-sick pay
-repayment vehicle sufficient?
-Atr
-affordable in retirement
-what is your lifestyle in retirement?

Question 12

What are interest only mortgages generally dictated by? (3)

Answer 12

Atr
Age
Available income

Question 13

Typical repayment vehicles for IO mortgages? (3)

Answer 13

PCLS
ENDOWMENT PLANS
ISA’s

Question 14

Considerations for using your pension scheme as repayment vehicle for interest only mortgage (6)

Answer 14

No guarantee
Tax relief
No life cover
Can start/stop contributions
Must be crystallised to get
Get employer contributions

Question 15

Considerations for using endowment policy for interest inly mortgage repayment(5)

Answer 15

-no guarantee of maturity value
-not possible to stop/start unless WOP
-has life cover built in
-fixed term-less flexible(some have sum assured increars)
-issue if get divorce as surrender is a bad idea

Question 16

Pros (5) and cons (4) of increasing monthyl interest payments for an IO Mortgage

Answer 16

Will reduce future interest payments
Debts will reduce and increase equity
Improve credit worthiness
Reduced debt=saving on interest
Less cash to payback in an emergency

Wont increase equity you own
Wont reduced capital balance of outstanding mortgage
Early repayment charges may apply
Reduced disposable income

Question 17

What are four suitable IO mortgage repayment vehicles

Answer 17

Pcls
Iss
Endowment policy
Regular savings scheme

Question 18

What costs can you claim against buy-to-let? (5)

Answer 18

Repairs that restore to originL condition (not improve)

Letting agent fees/asvertising

Furniture bought for peoperty

Service charges/ground rent

Insurance

Question 19

What is the rent a room relief?

Answer 19

£7500 tax free

Question 20

Buy-to-let considerations (14)

Answer 20

Tangible assets
Takes on additional debt
Provides income
Capital growth and hedge against inflation
Can use buy to let mortgage
Expenses for maintenance/costs
Can purchase in joint names for tax efficiency
Stamp duty surcharge (+3%)
Illiquid
Income and gains are taxable (cgt surcharge)
Cannot partially sell (to provide pcsl
For example)
Void periods
Not iht efficient-will form part of estate
Purchase costs/solicitor costs/ongoing
Interest rate risk
Admin/hassle
Reduces emergency cash/how fund deposits?

Question 21

On rented property how much is the trading allowance?

Answer 21

£1000 tax free

Question 22

What is an offset mortgage (7)

Answer 22

-No interest is paid on savings amount
-Reduced interest overall
-Capital balance reduces
-Easy access
-Interest rate is fixed
-No tax is paid on interest received-as it would be if held in deposit account-lowering income tax
-Wouldnt use psa