Mortgages Knowledge Assessment

Test Paper M4

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The pass mark is 70% overall.

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1. Historically, why were most buy-to-let mortgages charged at a higher rate of interest than most owner-occupied mortgages?

A. The legal costs of setting up the mortgage were higher B. The lender usually had to raise mortgage funds by issuing fixed-term loan stock on the commercial money market C. They had to be registered with the Land Registry D. They were assessed on commercial loan terms

2. A mortgage protection policy is a type of:

A. Convertible term assurance B. Decreasing term assurance C. Increasing term assurance D. Level term assurance

3. Jason is in the process of applying for a mortgage and has just received a tariff of charges from the lender. What is the latest point in the process that he has reached?

A. Issue of the initial disclosure documentation B. Pre-application disclosure C. Offer stage D. Legal completion

4. Which of the following is a feature of a repayment mortgage?

A. Repayments will be unchanged throughout the term of the mortgage B. The borrower will have to take out an investment policy to cover the shortfall at the end of the mortgage C. The capital amount does not reduce over the term of the mortgage D. The capital and interest payment proportions change over the term of the mortgage

5. David, an existing residential mortgage adviser, is required to take a further examination to be permitted to give advice on which of the following mortgages?

A. Buy-to-let mortgages B. Equity release C. Further advances D. Second charges

6. What is the correct name for a mortgage scheme that typically allows overpayments, underpayments and payment holidays?

A. Cap and collar B. Fixed C. Flexible D. Variable 7. What requirement rests on a discharged bankrupt when applying for a mortgage?

A. Always disclose the previous bankruptcy to the lender B. As he is now discharged, there is no requirement C. Only disclose the information if the lender asks D. To ensure the lender conducts a thorough credit search

8. Walter and Winnie own their house on a joint tenancy basis. If Walter dies?

A. His share of the property will pass automatically to Winnie B. His share will pass to whoever is nominated in his will C. Winnie will need to purchase Walter’s share of the property D. Winnie will own 50% of the property but retain an interest in the other 50%

9. Which type of fee is normally charged on a fixed-rate mortgage, but not on a standard-variable rate mortgage?

A. Arrangement fee B. Broker fee C. Higher lending charge D. Valuation fee

10. An advantage of a variable rate mortgage is that:

A. Arrangement fees can always be added to the loan B. Borrowers are able to benefit from reductions in interest rates C. First-time buyers are able to budget accurately in the early years D. Repayments to the lender are lower than any other product