John and Sally are intending to purchase their first residential property and are considering purchasing a two$-$year$-$old purpose$-$built leasehold flat in the North of England for $130,000.$ They are discussing their mortgage requirements with an adviser from Shires Bank and want as much help and advice as possible.

They want to be as certain as possible that their loan will be fully repaid by the end of the mortgage term and want to keep monthly payments to a minimum for at least the next three years. They also want the cheapest possible options to protect the mortgage in the event of illness, unemployment or death.

John and Sally's net income is $2,500$ per month and they estimate that their basic essential expenditure will be $900$ per month and their basic quality$-$of$-$life expenditure will amount to $500$ per month. They also have a car loan, which they repay at $250$ per month, with two years left to run.

They have accumulated savings of $22,000$ and they intend to use $20,500$ of this as a deposit, with the balance to meet their estimated conveyancing costs. All other fees and costs will be met by John and Sally's parents.

Shires Bank's affordability criteria require mortgage payments to be no more than $80\%$ of free disposable income, taking into account committed expenditure, basic essential expenditure and basic quality$-$of$-$life expenditure.

Shires Bank's current standard variable rate is $4\mathrm{.}50\%.$ John and Sally are concerned that interest rates may rise in the near future.

$1.$ In considering the security provided by the property John and Sally wish to purchase, Shires Bank is likely to be most interested in the:

a$.$ cost of maintaining any common areas.

b$.$ freeholder's rights of access to the property.

c$.$ potential for John and Sally to purchase the freehold.

d$.$ unexpired term of the lease.

$2.$ Which of the tallowing statements is true in respect of the most appropriate method of mortgage repayment for John and Sally?

a$.$ Bull$-$in life cover is not included.

b$.$ In the event of financial difficulty, it would not be possible to extend the mortgage term to reduce the monthly payment.

c$.$ The capital is repaid as a lump sum at the end of the mortgage term.

d$.$ The monthly payment consists mainly of capital in the early years and mainly of interest in the later years

$3.$ When considering John and Sally's requirement to protect their proposed mortgage liability in the event of either death, which of the following products would require the lowest regular premiums?

a$.$ A critical illness insurance policy.

b$.$ A mortgage protection assurance policy.

c$.$ A whole$-$of$-$life assurance policy.

d$.$ An endowment assurance policy.

$4.$ Based on the lender's affordability criteria, what will be John and Sally's maximum permissible monthly mortgage payment?

a$.680$

b$.850.$

c$.880.$

d$.1,100.$

$5.$ In assessing John and Sally's affordability, what is the amount that will be classed as annual committed expenditure?

a$.3,000$

b$.6,000$

c$.10,800$

d$.19,800$

$6.$ Assuming John and Sally complete the purchase of the flat, which of the following fees would be payable after completion?

a$.$ Bankruptcy search fee.

b$.$ Land registration fee.

c$.$ Local Land Charges Registry fee

d$.$ Title indemnity fee.

$7.$ Which of the following products available from Shires Bank would be most suitable for John and Sally?

a$.$ Capped rate of $5\mathrm{.}0\%$ for three years

Arrangement fee $-995.$

No early repayment charges.

Maximum loan$-$to$-$value ratio $-90\%.$

Interest calculated daily.

b$.$ Discounted rate at $1\mathrm{.}5\%$ below the bank's standard variable rate for three years.

Arrangement fee $-750.$

Early repayment charges $-$ appropriate discount to be repaid during discounted period.

Maximum loan$-$to$-$value ratio $-80\%.$

Interest calculated daily.

c$.$ Fixed rate of $3\mathrm{.}75\%$ for three years

Arrangement fee $-550$

Early repayment charges $-5\%$ of amount redeemed within the first three years

Maximum loan$-$to$-$value ratio $-85\%$

Interest calculated annually

d$.$ Fixed rate of $5\mathrm{.}0\%$ for four years

Arrangement fee $-495$

Early repayment charges $-5\%$ of amount redeemed within the first five years

Maximum loan$-$to$-$value ratio $-90\%$

Interest calculated annually

$8.$ The most appropriate mortgage payment protection product for John and Sally would most commonly pay the benefit:

a$.$ for a maximum of two years.

b$.$ immediately on acceptance of a claim.

c$.$ in the form of a tax$-$free lump sum.

d$.$ up to a certain percentage of income.

$9.$ Which form of additional security is Shires Bank most likely to require if John and Sally are successful in applying for the maximum loan that meets the bank's affordability criteria?

a$.$ A collateral deposit.

b$.$ A higher lending charges.

c$.$ A life assurance policy.

d$.$ A personal guarantee.

$10.$ Which of the following would not be covered in the report the lender would commission to assess the security offered for the mortgage?

a$.$ Approximate floor area.

b$.$ Energy efficiency assessment.

c$.$ Insurance valuation