CeMAP 2 – Free Mock

Within mortgage terminology the "Mortgagee" is the lender and the "Mortgagor" is the borrower.

When an adviser gathers the information to provide a mortgage recommendation they must first establish affordability. A self-employed borrower will have to provide information confirming their income and expenses using their self-assessment details and the Net Profit figure is used. This is calculated using: The record of  the turnover (income from the business activity) and expenditure. Gross profit = Gross turnover less raw materials and goods purchased to sell (i.e. stock). The Net profit = Gross profit less expenses.

A capped rate mortgage is a variable interest rate mortgage often set at the lenders SVR and will move up and down, but will not exceed the cap within the special deal term. The Cap is the highest the rate will go.

A Cashback mortgage  offers a genuine non repayable sum that is either a fixed amount or a percentage of the amount borrowed. The amount is not added to the loan and does not need to be paid back as long as the borrower stays with the lender for a set term. The lower the LTV, the higher the cashback. 

When a lender offers a high LTV mortgage they often require a HLC. This is often used to buy a mortgage indemnity insurance guarantee (MIG) policy that is designed to protect the lender if the property is repossessed and sold for less than the outstanding mortgage. The MIG policy is provided by an insurer who then has the right to sue the borrower for the amount paid to the lender under their rights of Subrogation.

UK Residential mortgage regulation only came into force in October 2004. Any mortgage taken out before that date and any mortgage taken out since 2004 where the borrower or the property does not meet the FCA regulated mortgage definition is treated as an unregulated mortgage and will not be covered by the FOS or the FSCS.

Before a lender will provide a mortgage offer they will conduct the underwriting process. This will involve checks on the property and the borrower. During the inspection of the property any issues identified may involve an undertaking. An undertaking means that the building is basically in good repair but the lender requires the borrower to undertake to carry out minor repairs to bring the property up to the standard of an average property. This must be completed within 3 months of the offer and is a condition of the mortgage.

Within the 3 main Land Law Acts of 1925 the borrower has the right to "Let" a property, but must state to the lender that the mortgage is for Buy to let purposes. If a person buys a property for their own residence and then subsequently Let the property without notifying the lender this is a breach of the mortgage terms. Borrowers must request a "Consent to Let" if they want to Let out their property.

A Guarantor agrees to stand by the debt of another. The borrower is responsible for the mortgage. The guarantor must pay if they default and can be a full or a limited guarantee. The guarantor must be advised to seek legal advice and can only be rendered invalid for a few reasons. This does not include a change of occupation.