CeMAP 2 – Free Mock

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.

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.

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.

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.

Mortgage payment protection insurance (MPPI) is a short term income replacement insurance policy designed to cover the monthly mortgage payments in the event that the borrower cannot work due to accident, sickness or unemployment (the self-employed are excluded from the unemployment element). It is a pure protection policy with no surrender value and can be obtained relatively cheap as there is no medical underwriting.

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. 

Waiver of premium is a rider benefit that can be selected on most life assurance and income protection insurance policies. It is designed to maintain the premiums when the policy holder is unable to pay due to sickness. The cost is added to the premium and will often have a minimum deferral period of 13 weeks.

Within the FCA Mortgage Conduct of Business sourcebook the rules state the definition of a regulated mortgage. Only mortgages that meet certain criteria will be regulated by the FCA and will be covered by the FOS for complaints as well as FSCS protection. The definition of a regulated mortgage states that the borrower or a family member must occupy at least 40% of the dwelling for residential purposes.

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