CeMAP The Mortgage Application Process 3 — Questions and Answers
Question 1: A self-employed applicant applying for a mortgage would typically need to provide how many years of accounts or SA302s?
- One year
- Two years (Correct answer)
- Three years
- Four years
Correct answer: Two years
Most lenders require at least two years of accounts or HMRC SA302 tax calculation forms to assess a self-employed applicant's income.
Question 2: What is 'portability' in the context of a mortgage product?
- The ability to transfer the mortgage to a new lender without redemption fees
- The ability to move the existing mortgage to a new property (Correct answer)
- The ability to increase the mortgage loan mid-term
- The ability to take payment holidays during the mortgage term
Correct answer: The ability to move the existing mortgage to a new property
Portability allows the borrower to transfer their existing mortgage deal to a new property, avoiding early repayment charges when moving home.
Question 3: Which regulatory body directly supervises mortgage lenders and advisers in the UK?
- The Prudential Regulation Authority (PRA)
- The Financial Conduct Authority (FCA) (Correct answer)
- The Financial Ombudsman Service (FOS)
- The Money and Pensions Service (MaPS)
Correct answer: The Financial Conduct Authority (FCA)
The FCA is responsible for the conduct regulation of mortgage lenders and advisers, including the rules set out in MCOB.
Question 4: Under the Mortgage Credit Directive (MCD), what reflection period must lenders give borrowers after issuing a binding mortgage offer?
- 3 days
- 7 days (Correct answer)
- 10 days
- 14 days
Correct answer: 7 days
The MCD requires lenders to give borrowers a minimum 7-day reflection period after issuing a binding mortgage offer before the borrower is required to accept.
Question 5: What is the purpose of the Mortgage Credit Directive's 'European Standardised Information Sheet' (ESIS)?
- To replace the mortgage offer document
- To provide a standardised comparison document enabling borrowers to compare mortgage products across Europe (Correct answer)
- To satisfy anti-money laundering requirements
- To confirm the property's market value to the buyer
Correct answer: To provide a standardised comparison document enabling borrowers to compare mortgage products across Europe
The ESIS is a standardised document that presents key mortgage information in a prescribed format to allow borrowers to compare products across different lenders and EU member states.
Question 6: If a borrower wishes to repay their fixed-rate mortgage early, what charge may apply?
- A redemption administration fee only
- An Early Repayment Charge (ERC) (Correct answer)
- A Higher Lending Charge (HLC)
- A Mortgage Indemnity Guarantee (MIG) fee
Correct answer: An Early Repayment Charge (ERC)
An Early Repayment Charge (ERC) is a penalty charged by lenders when borrowers repay or overpay beyond agreed limits during a fixed or discounted rate period.
Question 7: Which of the following best describes 'adverse credit' in a mortgage context?
- A borrower who has recently changed employment
- A borrower with a history of missed payments, CCJs, or bankruptcy (Correct answer)
- A borrower who is applying for a buy-to-let mortgage
- A borrower seeking a mortgage above 80% LTV
Correct answer: A borrower with a history of missed payments, CCJs, or bankruptcy
Adverse credit refers to a negative credit history including County Court Judgments, missed payments, defaults, or bankruptcy, which can restrict mortgage options.
CeMAP The Mortgage Application Process 3
A self-employed applicant applying for a mortgage would typically need to provide how many years of accounts or SA302s?