Mortgages Flashcards
(12 cards)
Why do we need a copy of the mortgage before exchange?
To ensure the client will have funding to complete / enables the mortgage lender’s requirements to be checked / confirms acceptance of the client’s mortgage application
Give three purposes of the report on title/certificate of title
It must be submitted to the lender to confirm the title is marketable and no onerous matters affect it / It confirms the property is acceptable security for the mortgage / To request release of the mortgage funds in readiness for completion
Give three reasons for obtaining a redemption statement at an early stage on a client’s sale.
To ensure sale price is high enough to repay all loans and expenses, to check early redemption penalty dates and because lenders vary in how long it takes to send them.
What five pieces of information should be given to obtain a redemption statement from the lender on your client’s sale?
Details and reference of firm / Borrower (client’s) name and address / account number / reason for request / date to which figure is to be calculated
What undertaking is made by a seller’s solicitor to the buyer’s solicitor when redeeming a mortgage on sale?
That they will discharge the mortgage forthwith on completion and deliver Form DS1/confirmation from the mortgagee of e-discharge at the Land Reg to the buyer’s solicitors as soon as received.
What is the effect of giving an undertaking?
An undertaking is binding on the firm giving it and must be complied with. Failure to comply is a breach of the SRA Code of Conduct 2011 and the Conveyancing Protocol. Buyer’s conveyancer can sue partners for breach, partners could be ordered by Court to make good the breach, partners may have to pay off mortgage from own resources, may be disciplined by SRA, risk of a fine (or imprisonment in extreme cases), client could complain.
What are the six steps to discharge a client’s existing mortgage on their sale?
- Inform lender of intention to redeem at outset (usually at time of requesting deeds)
- Obtain a redemption statement after exchange
- Reply to TA13 giving discharge undertaking
- Discharge mortgage from proceeds of sale and forward DS1
- Obtain confirmation from Land Reg or Lender of the discharge
- Forward confirmation of discharge to buyer’s conveyancers and request your undertaking is discharged.
Give four things that show a buyer’s solicitor that an existing mortgage will be redeemed by the seller’s solicitor on completion.
Seller’s solicitors give undertaking in TA13 / Property is not sold subject to the mortgage / There is a binding promise that the mortgage will be paid off on completion / Discharge evidence will be supplied so the Land Registry can remove the entry
Describe an interest only mortgage
Usually the cheapest form of mortgage. The borrower makes interest only repayments each month and no capital repayment is made. It is not coupled with a life policy or other financial product. Borrowers must make their own arrangements to ensure the capital can be repaid at the end of the term.
Describe a repayment mortgage
Traditional and most common. Loan is made on the basis of monthly repayments made up of part capital and part interest. The loan will be fully repaid at the end of the mortgage term. The advance is based on a percentage of the purchase price, which can be increased if buyer pays higher lending charge (HLC). Lenders may insist on mortgage protection to cover the event of the borrower’s death.
Describe an endowment mortgage
Type of interest only mortgage. The borrower takes out a life policy for the full loan at the time of the mortgage with the same term. The policy is assigned to the lender, the borrower agrees to pay the monthly premiums and pays interest only to the lender, so the capital sum remains outstanding for the full term but is paid off when the policy matures, however the policy may not always cover the full loan and the borrower will be liable for shortfall.
Describe a pension mortgage
Mainly for self-employed. Borrower pays lender interest only and pays into a personal pension plan. On retirement, part of the pension is used a lump sum to repay the lender’s debt
