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32 Cards in this Set
- Front
- Back
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What is a personal pension? |
A pension product that is a range on an individual basis. Rather than a pension scheme run by an employer. The benefits eventually received a pen on the performance of the funds in which the individuals purchasing contributions are invested. |
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What is a stakeholder pension? |
A simple, low cost pension product that meets government standards on charges and level of contribution. |
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What are pension mortgages? |
One of the benefits of a personal pension plan or stay cooler pension is that up to 25% of the accumulated fund can be taken as a tax-free cash sum when the pension payments commence. Pension plans have potential to be used as mortgage repayment vehicles. |
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What is The financial benefit of pension plans compared to endowment policies? |
Pension contributions have tax relief, there is no tax relief on endowment policy premiums. The fund in which the contributions are invested is not subject to income a capital gains, which means it should grow faster than the equivalent endowment policy fund. |
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What are the main benefits of using an ISA as a mortgage repayment vehicle? |
Funds grow free of tax on capital gains, thus reducing the cost of repaying the mortgage. Mortgage can be paid early if the funds rate of growth exceeds that assumed in the initial calculations. |
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What is a variable and fixed rate? |
Variable rate- monthly payments rise and fall in line with interest rate changes. Fixed rate- interest rate is fixed for a specific period usually between 1 and 5 years then reverts to the standard variable rate. |
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What is a discount mortgage rate and a capped rate for mortgages? |
Discount rate- interest rate a discount from a standard variable rate. Maybe penalties for early repayment. Capped rate- interest rate is variable but cannot rise by the specified up a limit or go lower than a lower limit for the banks benefit. |
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Mortgages: what is a base rate tracker and flexible mortgage product? |
Base rate tracker- interest moves up and down in line with changes in bank rate- usually slightly higher. Flexible- facility to overpay, and a pay and /or take payment holidays without incuring penalties. Interest is calculated on a daily basis |
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Mortgage products: what is a Deferred interest and a low start product? |
Low start- repayment mortgage with lower initial payments during which capital is not repaid. Tire payment required after the initial period to achieve repayment on capital.
Deferred interest- interest payments increase later in the term. Suits borrowers who expected an increase in income over the term of the mortgage. |
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Mortgage product: what is a CAT- Standard? |
Charges, access and terms (CAT) meet standards set out by government. Likely to appeal to borrowers who want clearly stated limits on charges. |
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What is an offset mortgage? |
If the borrower has an offset interest, only mortgage for £80,000 and £25,000 in savings with the lender. They can opt to wave payment of interest on their savings, enabling interest to be charged on a net loan of £55,000. This calculation is repeated on a daily basis. |
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What is the term for accident, sickness and unemployment insurance? |
Covers mortgage repayments, usually for a maximum of 2 years, if the beneficiary is prevented from earning an income. |
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What is income protection insurance? |
Provide a regular income for indefinite period. If the beneficiary is prevented by illness from working |
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What is mortgage protection insurance? |
Provide a lump sum that can be used to repay the outstanding mortgage loan if the life assured dies |
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What is a mortgage indemnity guarantee? |
Covers the difference between the sale proceeds after a lender has taken possession of a property and the outstanding amount on the loan. |
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What is equity release? |
In a mortgage context. Equity is the excess of the market value of a property over the outstanding amount of any loan or loan secured against it. Commonly used by older homeowners over age of 60 and even minimum age of 70 |
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What is the equity release council? |
Council's role is to ensure that equity release products are safe and reliable for customers. Member sign up to its statement of principles, which set out standards of conduct, particularly in relation to product standards and of information provided customers. |
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What is a home reversion plan? |
Scheme provider gets a percentage of the home but you can still live at the property. They will then get their percentage from the house when it sells the original owner moves into a care home or dies. |
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What Are the two types of bridging finance? |
Closed bridging- Deborah has a feasible plan for repeating the loan within the agreed time scale. Typically, this is through the sale of an existing property and requires a board to have a firm buyer. Open bridging- The bar one needs finance to buy the new property, but does not yet have a firm buyer for their existing property. |
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What are commercial loans? |
These are for businesses of all sizes. Such lending is normal secured on The companies, property or other assets. The exact interest rate will depend on the risk that the lender believes is worth. |
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What is unsecured borrowing? |
Relays on personal promise or covenant of the borrower to repay. These are a higher risk than secured lending with the consequence of a higher rate of interest. The borrowing is for a much shorter period compared to secured borrowing. |
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What are personal loans? |
Personal loans off about banks, building sites and some finance houses. They're normally over a term of 1 to 5 years. Interest is fixed and remains unchanged throughout the term. Used for car, holiday credit card balance. |
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What is a charge card? |
A charge card is used by the customer the same way as a credit card. The outstanding balance on a charge card must be paid in full each month. American Express. |
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Define a mortgagor & a mortgagee: |
The mortgagor is the borrower and the mortgagee is the lender. |
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For what reason, might an ISA not be suitable for someone who is arranging and interest only mortgage of 300,000 over a 5-year term? |
An ISA has an annual investment limit which might make it difficult to find a large mortgage and/or when arranged over short-term. |
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It is not the responsibility of the lender to ensure that it borrow has a repayment vehicle in place for an interest only mortgage. True or false? |
False! MCOB rules require the lender to confirm at the outset that credible repayment strategy is in place and then we confirm this at least once during the mortgage term. |
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Chris is 53 and is pleased to see from his annual personal pension statement that is pension but is growing enough to enable him to take his tax-free lump sum and pay off his interest only mortgage. Will this be possible? |
Not yet because Chris cannot access his pension fans until he is at least 55 |
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An advantage of a flexible mortgage is the ability to take further advances to the lenders pre-arranged limit. True or false? |
True |
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What is the main advantage of a capped rate mortgage? |
If interest rates go up, the mortgage interest rate will not exceed the pre-arranged limit, In other words, the cap |
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Describe how a home reversion plan works? |
Home reversion plans involve the homeowner selling a percentage or all of the property to a scheme provider. The customer retains the right to live in the house, rent-free or for a nominal rent until their death or until they move into a permanent residential care. At that point the property sold. The provider receives a share of the proceeds recurrent to the share of ownership |
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What is revolving credit? |
If facility that allows you to borrow more before you've paid off the initial amount borrowed. Credit card borrowing is the most common example. |
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What is revolving credit? |
An arrangement whereby the customer can continue to borrow for an amount while repaying existing debt. |
