As expected, June turned out to be a hectic month, taking on some 33 new clients as well as dealing with my existing clients. As if that was not enough, I was also trying to help out some very unfortunate Equitable Life members.
This left me very little time to open my Cemap syllabus but having gone through it already and confronted any fears I had about the exam, I was not too concerned. Furthermore, I felt safe in the knowledge that I had a training and revision session with Scottish Widows Bank arranged at the beginning of July.
This turned out to be an extremely useful afternoon, clearing up any doubts my colleagues and I might have had about the syllabus contents. Like me, my two colleagues were happy with the advising, processing and types of mortgage available but were perhaps less confident in relation to some of the legal and post-completion matters. Our revision session concentrated around these areas, which we found extremely helpful, and was followed by some practice exam questions.
In not quite exam conditions we all achieved a creditable pass – which was encouraging – but mistakes were made. Largely, this was not because of a lack of knowledge but because of poor exam technique. Having not sat an exam for many years, basic techniques such as reading the question properly and only answering exactly what is being asked are as important as your knowledge of the subject matter.
You must not approach this exam as an IFA – and it seems you have to accept that endowment mortgages are still a good way of repaying your loan.
By some extraordinary quirk of fate, on the day after our training, one of my colleagues was on the phone to one of his clients discussing his mortgage. As you might imagine, this is quite commonplace in a general practice and so I was not paying attention but when he suddenly started discussing the different classes of title which can be found in the Proprietorship Register at the Land Registry, my ears pricked up.
It turned out that there was a delay on the legal side of the mortgage processing due to the deeds being lost. My colleague was able to explain the difference between absolute, qualified and possessory title and what the solicitor would have to do in order for it to become absolute and resolve this problem.
Having now practised several past papers, it is clear that not only reading the question properly is imperative but that every now and again some slightly obscure question comes up which might be to do with town planning consent or the difference between an NHBC guarantee and a Zurich Municipal. From this point of view, the whole syllabus needs studying if you are to be sure of a healthy pass mark.
I shall now continue to study a more condensed version of the syllabus, referring to the main one where necessary, over the next month or so when I can find sufficient time. Only when I am 100 per cent satisfied that I know the whole syllabus shall I make the dreaded call to the institute and book my examination date. If you think I am disclosing in this article when that will be – think again.
Scottish Widows Bank Revision Round-up
Relatively few new mortgages are taken out using endowments as repayment vehicles (about 4 per cent according to recently published figures). However, a significant number of such mortgages are in existence and, as the subject is included in the examination syllabuses and study materials, it is highly likely that questions on this topic will appear in the examinations.
Students will, no doubt, have the basic knowledge and understanding that only a non-profit or a full with-profits endowment are guaranteed to repay an interest-only mortgage at the end of the term. The reason for this is that the sum assured is equivalent to the value of the outstanding debt – assuming that no arrears have accrued.
However, questions in the examination are likely to go some way beyond these basics. For example, questions could test students' knowledge of the difference between the guaranteed death benefit and the sum assured or what is absolutely guaranteed to be paid out at the end of the term of a low-cost endowment or a unit-linked endowment.
In the case of a low-cost endowment, only the sum assured is guaranteed to be paid although reversionary bonuses, once added, will not be taken away – provided that the policy is held to the end of the term.
In the case of a unit-linked endowment, there is no guarantee that the policy will have any value at the end of the term. This is because there is no sum assured and the value of the policy at the end of the term is the bid value of the accumulated units. If, in the – admittedly unlikely – event that the units became worthless, then the policy itself would have no value.
Clearly, there are a number of other issues regarding endowments that need to be understood, but the above demonstrates how a good knowledge and understanding of the principles of each type of policy is required.
Remember, also, that questions on the mortgage code dealing with the giving of advice to clients (part a of the syllabus) are virtually certain to appear in the examination paper. Mortgage code questions are not particularly well answered in the examination and a good deal of the code is concerned with the giving of information to customers.
Examination questions to test basic knowledge and understanding of the code could, for example, focus, quite simply upon what information an adviser is required to give a customer, specifically in relation to interest-only mortgages.