Topic 3: Mortgage processing and Borrowing Flashcards Preview

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Flashcards in Topic 3: Mortgage processing and Borrowing Deck (19):

What costs are involved with mortgages

Legal fees
Stamp duty
Application fee
Furnishing costs
The actual mortgage


What is stamp duty?

A tax that is levied onto property over the value of £125,00


What is LTI

Loan to Income
When a bank gives out a mortgage they work out the ratio of the size of the loan to the size of the income of the customer.


What is the LTI ratio

Basic salary + extra income - credit commitments


What is LTV

Loan to Value
The ratio of the size of the loan to the value of the property


How long is the typical mortgage period

25 years


Ways to repay a mortgage?

Repayment - Monthly spilt of capital and interest
Interest-only - Pay monthly income and the capital outright at the end


What 4 ways can interest be charged on a mortgage

Fixed - rate: Doesn't change
Variable rate: Changes based upon the bank rate
Offset: Savings are used to reduce the amount of interest paid
Loyalty mortgage: Cheaper for loyal customers


Islamic Home Finance - what's this

Ijara method - Pay for house + rent (no interest)


What's loan forbearance

A repayment holiday in which you don't pay back the loan for a while (must be valid)


What's a help to buy equity loan?

Purchaser - 5%
Lender - 75%
Government - 20% (They own part of it)


What's a shared ownership scheme?

Pay for part of the house and rent the rest the owe


What's a newbuy house

The purchaser puts down a 5% deposit


What's a buy-to-let mortgage

Owner becomes a landlord and rents it out. Must have a valid tenancy agreement


What's hire purchase?

Renting something, return at any time.


What's personal contract purchase?

A car hire purchase


When does a person have to repay a student loan?

Once they've finished studying
Once they earn over £21,000 a year
Stop after 30 years


What is life insurance?

also known as life cover or life assurance is a way to help protect your loved ones financially if you were to die during the length of your policy


What is PPI and what happened?

Payment protection insurance
Payment protection insurance (PPI) is the insurance sold alongside credit cards, loans and other finance agreements to insure payments are made if the borrower is unable to make them due to sickness or unemployment.
However, the small print made it invalid for some users and they've had to pay out $23bn compensation