Redmill Week 1 Flashcards
(45 cards)
What does the term ‘equity’ mean?
Equity means ‘ownership’ in the property
What is meant by the term ‘equity release’
Equity release is releasing equity from the value of the property
If the property is owned without a mortgage, how much equity would one be said to have?
100% equity
Name 4 reasons one may consider an equity release product?
- Repaying debts
- Funding home improvements
- Making gifts
- To provide for costs of long-term care
- Lifestyle improvements
Increasing income
How is the state pension funded?
The state pension is funded by the working population paying NIC
What are 3 reasons one may not want an equity release policy?
- Reduces inheritance
- Impacts means tested benefits
- Difficult to come to terms with not owning 100% of property
- High costs
What is a lifetime mortage?
An open-ended loan against the property which is repaid on death, sale of property or entering long-term care
If one takes out a lifetime mortgage, can they remain in the property rent free?
Yes
How is the debt of a lifetime mortgage secured on a property?
Against the value of the property on a ‘1st Legal Charge’
What is the usual remaining lease required for a lifetime mortgage is the property is a leasehold?
- 80 Years, or
- 155 years minus the youngest customers age
If a lifetime mortgage customer fails to maintain the property, what may happen?
The cost of repairs can be added to the debt
If interest on a lifetime mortgage is rolled up, on what basis will it be?
On a compound basis
Which two factors determines how much a lifetime mortgage customer can borrow?
- The age of the customer
- Property value
Is the LTV based on the younger or older life?
The LTV is usually based on the younger life
What does a drawdown lifetime mortgage allow you to do?
Allows for some money now and some later on, with no interest charged until the money is taken.
It allows for a pre-agreed cash reserve that the customer can draw on
Who could a drawdown lifetime mortgage be suitable for?
Those who are ‘asset rich and cash poor’
What is an Enhanced Lifetime mortgage?
It offers a higher LTV for those with worse health, although it comes with higher interest rates
What is a home income lifetime mortgage?
A lifetime mortgage that provides an income for the remaining life - like an annuity
What is a shared appreciation mortgage (SAMs) and why are they now a legacy product?
It involved the provider to take a share in the future growth of the property.
They are now legacy products as it meant in a property boom there would be significantly more owed to the lender.
What is the usual type of interest rate for lifetime mortgage policies?
Fixed interest
How much of an overpayment may be paid on a mortgage without penalty?
10%
Who may a payment holiday be offered to?
A payment holiday may be offered to those who have made overpayments in the past
Who is a secured advance covered by?
Mortgage Credit Directive (MCD)
Who is an unsecured advance covered by?
Customer Credit Act of 1974 and 2006
