LIBF CeMAP (Certificate in Mortgage Advice and Practice) — All Questions

During conveyancing, a 'local authority search' is carried out mainly to reveal:

• a.The seller's outstanding mortgage balance and the amount of equity they hold in the property they are trying to sell
• b.Matters such as planning history, road schemes, and whether the property is in a conservation area or subject to enforcement notices✓
• c.The borrower's credit score
• d.The lender's interest rate

A local authority (local land charges) search reveals information held by the council - planning permissions and conditions, building regulation matters, nearby road proposals, conservation-area status and enforcement notices. It helps the buyer and lender understand issues affecting the property.

An 'environmental search' during conveyancing is designed to identify risks such as:

• a.The estate agent's commission
• b.The lender's profit margin
• c.Contaminated land, flood risk or former industrial use affecting the property✓
• d.The seller's employment history and salary details, which the lender uses to confirm that the sale price is realistic

An environmental search flags risks such as land contamination, flooding, subsidence or proximity to landfill/former industrial sites. These can affect value, insurability and mortgageability, so lenders and buyers use the search to assess and, if necessary, act on such risks.

A tax charged on the purchase of property, which differs between the UK nations, applies in England and Northern Ireland as:

• a.Land Transaction Tax
• b.Land and Buildings Transaction Tax
• c.Council Tax
• d.Stamp Duty Land Tax (SDLT)✓

Purchase taxes are devolved: England and Northern Ireland charge Stamp Duty Land Tax (SDLT), Scotland charges Land and Buildings Transaction Tax (LBTT) and Wales charges Land Transaction Tax (LTT). Rates and thresholds change over time, so current figures must always be checked.

Buyers of an additional residential property (such as a second home or a buy-to-let, on top of a main home) typically face:

• a.An automatic exemption from stamp duty
• b.A higher-rate surcharge on the property purchase tax (for example on SDLT)✓
• c.A reduced rate of purchase tax that is lower than the rate paid by ordinary first-time buyers on their only home
• d.No purchase tax at all

Purchasers of additional dwellings usually pay a surcharge on top of the standard purchase-tax rates (for example the higher rates of SDLT in England and Northern Ireland). The exact surcharge percentage and thresholds change from time to time and should be verified against current rules.

First-time buyers in England and Northern Ireland may benefit from:

• a.Free buildings insurance from HMRC
• b.A guaranteed interest rate for life
• c.First-time buyer relief reducing or removing SDLT up to specified thresholds✓
• d.An automatic ban on paying any deposit at all, so that first-time buyers can borrow the entire purchase price of the home

First-time buyers can qualify for SDLT relief that reduces or removes the tax up to specified purchase-price limits. Because these thresholds and the qualifying conditions change over time, advisers should confirm the current rules and refer clients to appropriate tax guidance.

Compared with a residential owner-occupier mortgage, a buy-to-let mortgage for a professional landlord is usually assessed primarily on:

• a.The number of the landlord's social-media followers and the level of local demand for short-term holiday accommodation
• b.The colour of the property
• c.The expected rental income relative to the mortgage interest (rental cover), alongside other criteria✓
• d.The landlord's council tax band

Buy-to-let lending is typically assessed on projected rental income covering the mortgage interest by a required margin ('rental cover' or interest coverage ratio), as well as the landlord's circumstances. Most such lending is not a regulated mortgage contract, though lenders still apply their own criteria.

A borrower who is letting a property they did not buy for business reasons (for example a former home they inherited and now rent out) may fall under:

• a.Foreclosure rules
• b.The equity of redemption
• c.The regulated consumer buy-to-let (CBTL) regime✓
• d.The commonhold regime, under which the borrower jointly manages the block's common parts with the other flat-owners

Where a borrower is not acting predominantly for business purposes, the buy-to-let may be a 'consumer buy-to-let' under the regime introduced by the Mortgage Credit Directive, giving those borrowers additional protections. Firms carrying on CBTL business must register with the FCA.

A short-term loan used to 'bridge' the gap between buying a new property and selling an existing one is known as a:

• a.Restrictive covenant
• b.Bridging loan✓
• c.Peppercorn lease
• d.Standard security

A bridging loan is short-term finance to cover a temporary funding gap - for example completing on a new home before the old one is sold, or at auction. It is typically more expensive than a mainstream mortgage and needs a clear exit strategy (usually the sale or a longer-term remortgage).

A homeowner with an existing first mortgage takes additional borrowing from a different lender, secured on the same property. This new loan is a:

• a.Second charge, ranking behind the first mortgage in priority✓
• b.A ground rent
• c.A first charge that automatically ranks ahead of the existing mortgage because it was the more recently advanced loan
• d.An unsecured personal loan

A loan from another lender secured on a property that already has a mortgage is a second (subsequent) charge. It ranks behind the first charge, so on sale the first-charge lender is repaid first. Because of the extra risk, second-charge loans generally carry higher interest rates, and (if regulated) fall under MCOB.

A 'joint borrower sole proprietor' (JBSP) arrangement is one where:

• a.The property has no mortgage
• b.The lender owns the property outright
• c.Two people own the property jointly but only one of them is liable to make the monthly mortgage repayments to the lender
• d.More than one person is party to the mortgage and liable for repayments, but only one (or some) of them is named on the property's legal title✓

Under a joint borrower sole proprietor mortgage, an additional person (often a parent) joins the mortgage and is liable for repayments to boost affordability, but is not an owner on the title. This can help first-time buyers, though the supporting borrower takes on liability without owning the property and should consider the implications, including SDLT.

A 'higher lending charge' (sometimes called a mortgage indemnity guarantee) is a fee a lender may charge on high loan-to-value lending to:

• a.Cover the lender against the extra risk of the borrower defaulting where the loan is a high proportion of the value✓
• b.Pay the borrower's deposit
• c.Buy the borrower's contents insurance
• d.A charge that reduces the borrower's interest rate to zero for the first few years in return for a single upfront fee

On high-LTV loans a lender may levy a higher lending charge to fund insurance protecting the lender against loss if the borrower defaults and the sale does not cover the debt. It protects the lender, not the borrower, who may still owe any shortfall even after the insurer pays out.

Under a typical 'shared ownership' scheme, the occupier:

• a.Owns the whole freehold of the property immediately and pays no rent at all to any housing association or provider
• b.Buys a share of the property (often on a lease) and pays rent to a housing provider on the remaining share, usually with the option to buy more (staircasing)✓
• c.Rents the entire property with no ownership at all
• d.Owns only the garden

Shared ownership lets a buyer purchase a share (commonly via a lease) and pay rent on the rest to a housing association or provider, with the ability to buy further shares over time ('staircasing'). It is aimed at those who cannot afford to buy outright, and specialist mortgage products apply.

The statutory 'Right to Buy' has historically allowed:

• a.Leaseholders to avoid all service charges
• b.Any private tenant to buy any property they happen to be renting at half of its current open-market value on request
• c.Eligible council (secure) tenants to buy their home, often at a discount based on how long they have been tenants✓
• d.Landlords to force tenants to buy

The Right to Buy has allowed eligible secure council tenants to purchase their home, usually at a discount linked to their length of tenancy, subject to conditions and limits. The scheme's availability, discounts and rules vary over time and between the UK nations.

A mortgage that is 'portable' allows the borrower to:

• a.Change lenders without any application
• b.Increase the loan without limit automatically
• c.Transfer the existing mortgage deal to a new property when they move, subject to the lender's criteria✓
• d.Avoid all early repayment charges in every case, whatever the reason the borrower has for repaying the mortgage early

Portability lets a borrower move their existing mortgage product (rate and terms) to a new property when moving home, subject to the lender re-assessing affordability and the new property meeting its criteria. It can help borrowers avoid losing a favourable rate or paying early repayment charges, though any additional borrowing is usually on separate terms.

In a house purchase, the buyer's 'deposit' represents:

• a.The portion of the purchase price the buyer funds themselves, with the mortgage funding the balance✓
• b.The ground rent for the first year
• c.A non-refundable fee paid to the estate agent to cover the cost of arranging viewings and marketing the property
• d.The lender's arrangement fee

The deposit is the buyer's own contribution to the purchase price; the mortgage covers the remainder. A larger deposit means a lower loan-to-value ratio, giving access to better rates and more lender choice. A deposit is also paid on exchange of contracts as a commitment to complete.