Topic 20 - Other Mortgage Products Flashcards Preview

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Flashcards in Topic 20 - Other Mortgage Products Deck (7)
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1
Q

Foreign currency mortgage:

A
  • Mortgage arranged in a foreign currency and secured on a UK property
  • Repayments are made in a foreign currency
  • Interest rates are determined by the rates applicable to that currency in the country it is used
  • £250,000 minimum loan in most cases
  • MCD usually requires additional warning in ESIS on the impacts of fluctuations in different currencies
2
Q

Sub-prime mortgage:

A
  • Made to credit-impaired borrowers.
  • Interest rates are higher than those for prime borrowers.
  • Arrangement fees tend to be higher than those for prime borrowers.
3
Q

Guarantor mortgage:

A
  • Allows higher lending than a standard mortgage.
  • Lender will require evidence that the guarantor can afford their own commitments as well as payments on the guarantor mortgage.
  • Guarantors over 65 will not usually be considered.
  • Guarantors can deposit savings as additional security.
4
Q

Business BTL:

A
  • For those looking to use property as investment. At least 40% of the land should be used in connection with a dwelling.
  • Lending is normally limited to 80% of the property valuation.
  • Lenders usually insist that a BTL borrower already owns their main residence, and sometimes at least one another property.
  • Lenders typically require a minimum gross income of £20-25k.
5
Q

ICR:

A

Rent after tax and running costs divided by mortgage costs.

Used to determine affordability of a BTL.

6
Q

Why does a BTL mortgage represent a greater risk to a lender?

A
  • There is no guarantee that the property will be permanently tenanted.
  • The borrower may treat the financial commitment less seriously than if the property were their own home.
  • The value and sell-ability of the property may be adversely affected if it is badly treated by tenants and not adequately maintained by the borrower.
7
Q

Expenses deductible from rental income:

A
  • Repairs and maintenance
  • Insurance
  • Letting agent fees
  • Ground rent and service charges
  • Costs of replacing furnishings