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4 Cards in this Set
- Front
- Back
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Which type of mortgage guarantees to repay the debt, assuming payments are made as required? |
A capital repayment mortgage guarantees to repay the debt as long as payments are made in accordance with the lender’s requirements. |
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What risks might face a borrower with a fixed‑rate mortgage? |
The risks with a fixed‑rate mortgage are as follows.
Market rates might reduce, leaving the borrower paying more than they would with a variable rate; they cannot take advantage of the reductions.
If rates have risen significantly during the fixed‑rate term, the borrower will move to a much higher rate at the end of the agreement.
Overall costs – set‑up fees, early repayment charges and so on – could reduce the financial benefit of the arrangement. |
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Why might a capped‑rate mortgage be better than a fixed‑rate mortgage? |
A capped‑rate mortgage might be better than a fixed‑rate mortgage because,although the maximum rate payable is set, the lender will pay less if the variable ratedrops below the capped rate. |
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‘A lender with a second charge has priority of repayment if the borrower defaults’.True or false? |
False – the holder of a second charge is always behind the holder of the first charge in the event of default. |
