TOPIC 2 - Types of Borrower Flashcards
Helena and Cath have a £120,000 mortgage in their joint names on their flat, which they bought two years ago. Helena and Cath have split up, Helena has moved out and Cath has not been able to contact her about paying the mortgage. Who will the lender hold liable if the mortgage payments are not made? (Assume that Helena and Cath own the flat on a joint tenancy basis.)
a) Cath for the whole amount, because she is the only person actually living in the flat.
b) Helena and Cath, but the lender will pursue Cath for the whole amount if Helena cannot be contacted.
c) Cath for 50 per cent of the outstanding payments and Helena for the remainder.
d) Cath for 50 per cent because she is only liable for half the amount borrowed.
b) Helena and Cath, but the lender will pursue Cath for the whole amount if Helena cannot be contacted.
What are the three main reasons why a personal borrower might require a mortgage?
Family home
First charge secured on property for additional lending
Bridging loan
What must a lender establish before agreeing to lend to trustees?
Ensure the trustees have authority to borrow according to the Trust Deed.
James wishes to raise £30,000 for his small business by arranging a further advance on the mortgage on his family home. Would the further advance be a regulated mortgage?
Yes. It would be secured on the family home so would be regulated (and 40% of land used for residential purposes).
An undischarged bankrupt cannot own property. True or false?
False.
Alan was declared bankrupt for the first time in London on 5 May this year. He will be discharged on:
a) 5 May next year.
b) 5 May two years later.
c) 5 May three years later.
d) 5 May five years later.
a) 5 May next year.
A person who makes a power of attorney is known as a donor. True or false?
True
Jack established an enduring power of attorney in 2006, with his daughter as his attorney. Jack is now suffering from dementia and his daughter wishes to sell his house and use the proceeds to extend her own home so that Jack can move in with her. Is she permitted to do this?
Yes if the EPA is registered with the Office of the Public Guardian at the time the done loses mental capacity.
Trust deeds automatically give trustees the power to borrow on behalf of the trust. True or False?
False
The FCA defines a high-net-worth mortgage customer as one with a minimum annual net income of £100,000, or minimum net assets of £1m. True or False?
False. £300k annually or £3m in assets.
A ‘professional customer’ is someone who has a financial services qualification. True or False?
False. The FCA defines a professional customer as one who has worked in the home finance sector for at least a year, in a professional position that requires knowledge of the product or service to be arranged, and who the firm reasonably believes to be capable of understanding the risks involved in the proposed arrangements.
Lenders are not permitted to lend to the personal representatives of a deceased person’s estate to buy property for a beneficiary. True or False?
False
Colette, Craig and Christine each wish to raise cash for their businesses by arranging a mortgage on a property they own and use as a dwelling. Which of the following mortgages would be a regulated mortgage?
The mortgage of Colette, who wishes to raise money for her limited company.
The mortgage of Craig, who is a sole trader with annual business turnover of £1.2m.
The mortgage of Christine, who is in a business partnership with her husband, and has annual business turnover of £450,000.
The mortgage of Christine, who is in a business partnership with her husband, and has annual business turnover of £450,000.
Which of the following statements are true in relation to a special purpose vehicle (SPV) used to hold property? Select all the true statements.
a) The SPV is owned and controlled by shareholders.
b) The property is owned by the shareholders.
c) The SPV forms a joint legal entity with the shareholders.
d) Shareholders have no liability for any SPV debts.
e) A mortgage lender is likely to require personal guarantees from directors.
a) The SPV is owned and controlled by shareholders.
d) Shareholders have no liability for any SPV debts.
e) A mortgage lender is likely to require personal guarantees from directors.
What is a mortgage prisoner?
Mortgage prisoners’ are those who have a regulated mortgage taken out before 26 April 2014 and may be prevented from changing to another arrangement with their existing lender or moving to another lender, due to the tightening of affordability requirements under MCOB.
