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EQUITY RELEASE > Random questions > Flashcards

Random questions Flashcards

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1
Q

When communicating with a customer, the lender must be:

A

Clear, fair and not misleading

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2
Q

Which of the following years experienced the highest rate of inflation?

2005

1997

1960

1975

A

1975

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3
Q

Doris is divorcing Dennis and wants to be removed from the mortgage. The lender has refused. Should Doris be worried?

A

Yes, as she remains liable

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4
Q

In order to provide a customer with a real-time financial promotion relating to Home Reversions:

A

The customer must consent

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5
Q

Which act opened the way for better regulation of Lifetime Mortgages?

FSA1986

FSMA2000

ITEPA2003

LMRA2001

A

FSMA2000

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6
Q

What effect will a rise in interest rates have on a Home Reversion plan?

A

There will be no effect unless part of the property is retained. In this case a rise in interest rates is a bad thing.

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7
Q

Where a further advance is issued on a lifetime mortgage how is the illustration created

A

The illustration is based on the new amount with a new section tying it to the original loan

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8
Q

Mary is the customer under a Home Reversion plan. She is responsible for meeting the costs of insurance under her lease but does not make the payment:

A

The provider is likely to meet the cost and then seek to recover it

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9
Q

What name is given to an interest rate which fluctuates between an upper and a lower level?

A

Cap and Collar

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10
Q

FCA rules require providers of Lifetime Mortgages and Home Reversions to recommend a client seeks:

A

Independent Legal advice

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11
Q

Which decade were shared appreciation mortgages introduced?

A

1990’s

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12
Q

What percentage of tax free cash can usually be taken from a personal pension?

A

25%

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13
Q

Bob dies leaving assets valued at £1m to his former employer. However, he entered into a lifetime mortgage and now owes £200,000. How will his estate be assessed for IHT if he died in 2024/25?

A

His estate will be subject to tax on £475,000

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14
Q

An “offer” in the context of a lifetime mortgage:

A

Is NOT legally binding on the borrower or the lender

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15
Q

Where a leasehold property is transferred into a Home Reversion plan, what kind of lease does the customer receive?

A

Sub-lease

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16
Q

There are a number of costs to be considered when looking at home reversion plans. Which of the following is NOT generally one of them?

Legal fees

Higher lending charge

Valuation

Arrangement Fee

A

Higher lending charge

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17
Q

What is the maximum binding award that may be made by the Financial Ombudsman Service in respect of an upheld complaint about a Home Reversion?

A

£430,000

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18
Q

Mavis has a Home Reversion plan under which she retains 40% of her property. In the event that she goes into permanent residential care and the provider decides to sell the property:

A

They have a duty of care to obtain the best price they can within a reasonable time

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19
Q

Under a Home Reversion Plan, who is responsible for repairs and maintenance to the property?

A

The customer

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20
Q

What is a “positive covenant”?

A

A duty imposed by a former owner

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21
Q

A pension which pays a guaranteed income based on length of service and salary at the point of leaving service is a:

A

Defined Benefit

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22
Q

Jeff has decided to sell his house and repay his lifetime mortgage. Unfortunately, a by-pass has been built next to his house and the value of the property has fallen to £10,000 less than the loan. He tells you his loan is a SHIP plan:

He must find an extra £10,000 if he wants to sell up

He will not be able to sell until the price rises

He has a no negative-equity guarantee and so can sell without finding any extra money

As the house is worth less than the loan, the SHIP scheme will wipe out the full loan

A

He has a no negative-equity guarantee and so can sell without finding any extra money

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23
Q

Under which of the following could the highest percentage of equity usually be released?

Shared Appreciation

Interest only mortgage with payments

Interest only mortgage without payments

Home reversion plan

A

Home reversion plan

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24
Q

A switch in method of mortgage repayment:

Is not covered by MCOB

Is regarded under MCOB as a new mortgage

Is regarded under MCOB as variation in the mortgage conditions

Is regarded under MCOB as a fundamental reconstruction and will invalidate the mortgage

A

Is regarded under MCOB as variation in the mortgage conditions

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25
What is the legal transaction that takes place when a home reversion provider takes over a property? Legal assignment Trust transfer Legal conveyance Mortgage
Legal conveyance
26
Which of the following is NOT a form of savings income? Interest from banks Interest distributions from authorized corporate bond Unit Trusts Income from an offshore deposit roll-up fund Interest content of a purchased life annuity
Income from an offshore deposit roll-up fund
27
The State Pension Credit comprises: A guarantee credit and a non-guarantee credit A savings credit and an income credit An income credit and a guarantee credit A guarantee credit and a savings credit
A guarantee credit and a savings credit
28
Alan wants to add his wife Mavis to his mortgage: This is not possible This may be possible, with the lender's consent This can be done easily by a solicitor This can be done easily by the adviser
This may be possible, with the lender's consent
29
If the FCA produces a set of regulations, what force is given to these regulations?
The force of law
30
How is a lifetime mortgage in England and Wales secured?
Legal Charge
31
Julie wants to raise some capital from her property. At the moment she only needs around 10% of the value of the property but she anticipates needing a similar amount next year and then again in a couple of years time. Which option is likely to be the best for her?
Lifetime mortgage
32
What does the regulator say in relation to illustrating the risks of a Home Reversion plan? They need not be illustrated as long as they are covered in the suitability letter They must be placed at the top of the illustration They must appear on each page of the illustration They must be given no less prominence than the benefits
They must be given no less prominence than the benefits
33
The first Home Reversion plans were introduced in: The 1900's The 1920's The 1940's The 1960's
The 1960's
34
What rate of Capital Gains Tax applies to the sale of an individual's principle private residence? Nil 10% 18% 28%
Nil
35
Under MCOB, which of these is NOT a significant variation in a lifetime mortgage? Removal of a name on divorce Removal of a name on death Addition of a name on marriage Further advances
Removal of a name on death
36
A Home Reversion provider must provide the customer with information in what form?
In a durable form
37
What effect will a rise in interest rates have on a shared appreciation mortgage?
None
38
Jim is not qualified to give advice on mortgages, though he works for a major lender, Can he talk to clients about mortgages?
Yes, but as long as he gives only factual information
39
Under a home reversion plan, who is the 'lessor'?
Reversion provider
40
Valuation of a property for Home Reversion should be done by:
A qualified independent valuer
41
How do FCA rules treat Equity Release plans
One market with two sectors
42
Justin follows the letter of the law in advising his customer but does not act in the customer's best interests. His actions could best be described as:
Legal but unethical
43
The sale of a property to a Home Reversion provider is likely to lead to a REDUCTION in:
Inheritance Tax
44
What tolerance around the APR quoted on an illustration is allowed by MCOB?
No more than 0.1% understated and rounded up to one decimal place
45
When a borrower dies with a lifetime mortgage The legal charge disappears The legal charge remains on the estate The entire estate passes to the lender until the debt is paid The property only passes to the lender but anything left over is paid to the estate
The legal charge remains on the estate
46
In which section of the illustration for a lifetime mortgage will details of fees be found?
11
47
On death of the customer can a Home Reversion or Lifetime Mortgage provider insist on the sale of the property?
Yes, both can
48
Why are Home Reversion plans generally limited to older customers?
The risk to the provider falls as the age of the customer increases
49
Where a client rejects a recommendation, how long do records need to be kept
Records should be kept for three years
50
The percentage of equity that may be released by a home reversion plan is usually: Greater than that available under Lifetime Mortgages Less than that available under Lifetime Mortgages About the same as that available under Lifetime Mortgages It is impossible to say
Greater than that available under Lifetime Mortgages
51
What rate(s) of CGT apply to individuals in respect of the sale of residential property (other than a main residence)? 10% and 20% 10% and 18% 18% and 24% 28% and 40%
18% and 24%
52
Under a home reversion plan, what legal transaction takes place?
Legal conveyance
53
What benefit may be derived from registering the lease under a Home Reversion plan?
To protect the rights of the company
54
Which Act of law led to the creation of the Financial Conduct Authority?
Financial Services Act 2012
55
Why might a Home Reversion provider wish to undertake a credit check on a potential client?
To protect themselves against the contract being later overturned
56
Which of the following is TRUE in respect of the UK demographic?
The proportion of old people in the UK is large and growing
57
Which of the following rates are available on Lifetime Mortgages? Standard and discounted rate Trackers and deferred rates Fixed and Capped rates All of the other options
All of the other options
58
Doris and David are customers under a Home Reversion. Which of the following would bring about an end to their lease?
The death of the second of them to die
59
Joan has a leasehold apartment, would she be able to apply for a lifetime mortgage?
Only if there is a long period on the lease
60
What is the main reason why a Home Reversion provider needs to undertake identity checks on a potential client?
To comply with anti-money-laundering regulations
61
Income Tax is levied on: All UK residents over the age of 16 All UK residents over the age of 18 All UK residents under the age of 80 All UK residents
All UK residents
62
Harold offers Home Reversion plans from all across the market but does not deal with Lifetime Mortgages. Can he describe himself as independent? Yes, in all cases No, not at all Yes, as long as he tells customers he does not offer Lifetime Mortgages Yes, as long as he obtains permission from the FCA before starting to use the term
Yes, as long as he tells customers he does not offer Lifetime Mortgages
63
Beryl wants to look at a Lifetime Mortgage on her leasehold house. What would generally be required as a remaining lease at the end of the mortgage term for this to be possible?
20-30 years
64
John owns his house with his wife Doris. When John dies, what will happen if the house is owned as tenants in common?
Laws of succession will apply
65
Tom took a lifetime mortgage two years ago. He wants to sell his house:
This is fine - he has a legal right to do so
66
How is a lifetime mortgage in Scotland secured?
Standard Security
67
Cold calling in the context of Equity Release:
Is not permitted
68
Which of the following might be a reason for a customer undertaking equity release? Needing funds to pay off other debts To make major purchases To help family Any of these
Any of these
69
What rate of interest is charged on home reversion plans?
None
70
Post sale, how often must a statement for a lifetime mortgage be issued?
Annually
71
What is the role of the Financial Policy Committee
To identify, monitor and take action to reduce financial instability
72
How is a borrower with a deferred interest rate loan affected by a rise in interest rates?
The amount due at the deferred date will go up
73
A Home Reversion provider takes a 60% share in David's property. What will be shown on the Proprietorship section at the Land Registry?
Both the customer and the provider
74
Where an adviser is allowing a non-high net worth retail client to make their own choice on Lifetime Mortgage rather than giving advice, this is:
Non-compliant
75
Which of these needs is most likely to be met by a Lifetime Mortgage? Desire to pass assets to future generations Requirement for more income Wish to reduce borrowing on personal loans Need for more protection
Requirement for more income
76
Peter is advising his clients, who are in financial hardship, on a Home Reversion Plan. Which of the following should he also advise upon in making his recommendation?
Liaising with creditors
77
What is the 'averaging principle' that applies to property insurance?
Reducing the amount paid under an insurance policy in proportion to any underinsurance
78
At what rate of tax is the interest element of a purchased life annuity usually taxed at source?
20%
79
The typical capital paid to a homeowner under a home reversion plan would be: 100-110% of the value transferred 35-60% of the value transferred 5-25% of the value transferred 70-90% of the value transferred
35-60% of the value transferred
80
SHIP plans require who to sign to confirm that the plan has been explained to the client? The adviser Another adviser not connected to the selling adviser A solicitor A clergyman of the client's choosing
A solicitor
81
The tax treatment of annuities used in home income plans is unfavourable with all income taxed at the individual's highest rate Is favourable as all the income is tax free Is relatively favourable with part of the income treated as capital and not taxed Is unfavourable with all income taxed at 40%
Is relatively favorable with part of the income treated as capital and not taxed
82
What is the difference between 'income' and 'wealth'?
Wealth is an accumulated value, income is a flow of funds
83
Under the FCA definition of a Home Reversion, any fixed term lease must be for at least:
20 years
84
Under MCOB, what age definition is used to describe Lifetime Mortgages?
Those restricted to older customers above a specified age
85
Under a Shared Appreciation Mortgage, the lender gets:
A share in the appreciation of the property only
86
Why are Building Societies not likely to enter the Home Reversion market?
They are restricted in the business interests they may hold and must concentrate on residential mortgages
87
FOS resolves complaints on the basis of what it regards as?
Fair and reasonable
88
In which of the following cases would MCOB pre-application disclosure regulations NOT apply? Making a personal recommendation Providing general information on products or services Providing information specific to the amount required on a specific mortgage Providing the means for the client to make an applicatio
Providing general information on products or services
89
Employment and Support Allowance (ESA) is split into how many phases?
2
90
Tom has a Lifetime Mortgage. He is still living in his residence and his lender has asked him to start paying capital as well as interest each month. What does MCOB definition of Lifetime Mortgages say? MCOB allows this with no restriction MCOB allows this if the repayment is fair MCOB allows this if the repayment is affordable MCOB does not allow this
MCOB does not allow this
91
Harriet entered a Home Reversion plan last year and passed the full value of her property to the reversion provider. She now wants to convert the third and fourth bedrooms into one larger room:
she can only do this if she obtains the approval of the provider
92
For how long must an annuity pay out?
For life or a specified term
93
For IHT purposes, taper relief :
Reduces the tax on a PET between years 3 and 7
94
Does a Home Income Plan require payments to the lender?
May or may not require payment to the lender during the borrowers life
95
in terms of risk how does A foreign currency mortgage compare to a standard mortgage?
Is a higher risk mortgage
96
The price paid for a share of the property under a Home Reversion Plan:
Will usually be lower than the market value
97
Who is responsible for dealing with the estate of a deceased person who left a will?
Their executors
98
Which of the following is true in respect of house prices?
They are not guaranteed to rise but have historically done so
99
John wishes to enter into a Home Reversion plan. He has a property valued at £500,000 and a mortgage of £10,000:
The Home Reversion may proceed only on the condition that the mortgage is paid off
100
Which of the following would suggest a client needs to review their lifetime mortgage arrangement? Marriage Divorce Inviting a partner to move in All of the other options
All of the other options
101
Which bodies provide 'Housing Grants'?
Local authorities
102
Tim has just died. What ability does his lender have to vary the redemption fee due?
There is no ability to vary the fee
103
All financial promotions must be:
Clear, Fair and Not Misleading
104
Which of the following may be impacted by taking a Home Reversion? Availability of State Benefits Availability of grants and allowances for home improvements / energy saving alterations Amount available to pass on to future generations All of the other options
All of the other options
105
How many loans may be made using the same property as security?
There is no limit
106
Which of the following is likely to derive the least benefit from a Home Reversion plan? Harold who dies one year after entering the arrangement Mavis who dies three years after entering the arrangement Bob who dies five years after entering the arrangement They will all benefit to the same degree
Harold who dies one year after entering the arrangement
107
A home income plan generally involves a loan and:
An Annuity
108
James dies in England, leaving a wife and child but no will. How much of his estate will his wife receive?
The first £322,000 and half of the rest
109
Who determines the rates and bands for income tax in England?
Parliament
110
What does MCOB say in relation to an adviser's knowledge of state benefits?
Advisers should recommend the client seeks alternative sources of information if they do not know all the details of the state benefits
111
Lifetime Mortgages contracts are:
Legally binding contracts between the borrower and the lender
112
What is covered by the FCA High Level Standards SYSC manual?
Systems and Controls
113
Under a Lifetime Mortgage, if the client goes into permanent long term care, what is the situation?
The loan will immediately fall due for repayment
114
Which of these is FALSE in relation to the differences between a Lifetime Mortgage and a Conventional Mortgage? No specified term on a lifetime mortgage, specified term on a conventional one Lifetime Mortgages are not secured on property whereas conventional ones are Interest rates may be different between the two The risks to the lender and borrower are different on the two forms of mortgage
Lifetime Mortgages are not secured on property whereas conventional ones are
115
Derek, your customer, has just died. He sold his property to a Home Reversion provider ten years ago. His will is being executed by his son David. What can David claim on Derek's behalf? Nothing The difference between what his Dad was paid at the time of entering the plan and the true value of the property The remaining equity in the property A lump sum 'death settlement' payment
Nothing
116
John owns his house with his wife Doris. When John dies, what will happen if the house is owned as joint tenants?
Doris will get the whole house
117
Is Income Support means tested?
Yes on income and capital
118
Equity release is significant for long term care because:
Equity Release will reduce the amount of money available to fund long term care
119
What is the maximum potential compensation for mortgage arranging under the FSCS?
£85,000
120
There are two main reasons for considering equity release, these are:
To produce income and to reduce estates for Inheritance Tax purposes

EQUITY RELEASE (2 decks)

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