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The Technical Quiz: 3 April

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To help you to keep up with the fundamentals of tax, retirement and financial planning, try answering these questions.

The following questions relate to buy-to-let mortgages.

Question one

Which of the following is not a factor taken into account by a lender when considering a buy-to-let mortgage?

A The employment status of the prospective tenants

B The borrower’s employment status

C The size and source of the borrower’s deposit

D Other assets owned by the borrower

Questions two

How does a buy-to-let mortgage differ from a conventional mortgage?

A A buy-to-let mortgage is never permitted for leasehold properties

B A buy-to-let mortgage is only granted to employed individuals

C A lender may require a larger deposit than for a conventional mortgage to reflect the increased risk

D The term on a buy-to-let mortgage is always shorter than for a conventional mortgage

Question three

Why might a lender enquire about a borrower’s other assets when considering a buy-to-let mortgage?

A The other assets may be used as additional security for the mortgage loan

B The other assets may be used to supplement the borrower’s income

C In the event that a tenant defaults on the rental payments, the lender can use the other assets to reduce the balance of the mortgage

D If the borrower has other assets, the lender may not impose early repayment charges

Question four

With a buy-to-let mortgage, what type of tenancy is the lender likely to insist on?

A An assured annual tenancy

B An agreed shorthold tenancy

C An assured shorthold tenancy

D  A Housing Act tenancy

Question five

When assessing a buy-to-let mortgage, in addition to normal lending criteria, the lender will consider:

A The potential rental income and the potential profit to be made on the sale of the property

B Whether the borrower will occupy the property at some time during the mortgage term

C The potential rental income and the borrower’s experience as a landlord

D The credit status of the potential tenants and their track record in respect of paying rent

Scroll down for the answers

Questions supplied by the CPD Centre. For more help keeping up to date with your technical knowledge go to www.ifacpd.com

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Answers:

1 A

2 C

3 A

4 C

5 C

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