Justin is a self$-$employed consultant who is selling his existing property to move to a larger home with his girlfriend, Angela, who will be the joint owner. Justin has approached his original mortgage adviser, who is employed by Justin$$s bank, for mortgage advice. Justin has accepted an offer of $130,000$ for his existing property and the outstanding balance on his interest$-$only mortgage is $98,500.$ He estimates that he will need to retain approximately $6,000$ from the equity to meet all moving costs.

He has made an offer of $180,000$ on another property; it is in urgent need of complete internal and external redecoration which will cost around $4,000,$ which he can meet from his savings. He believes the property to be structurally sound, and he will require the cheapest form of valuation or survey offered by the lender.

Justin has chosen to keep full accounts and they show increasing net profits for the last three years of $47,000,53,000$ and $59,000$ respectively. He has no business overdraft. Angela has recently started a job as a hairdresser, earning a basic salary of $18,000$ pa$.$ Angela's own self$-$employed hairdressing business closed last

The value of Justin's existing repayment vehicle has fallen considerably over the past year, and he has decided to change to a repayment basis for his new mortgage. He is looking for a mortgage product that will minimise his monthly payment and enable him to benefit immediately from any overpayments made. It is widely anticipated that interest rates are likely to fall over the short to medium term. Justin and Angela also require advice on the protection products they should consider in connection with the mortgage.

The current standard variable rate is $4\mathrm{.}05\%,$ and additional security is required if the loan$-$to$-$value ratio exceeds $80\%.$ For self$-$employed applicants, income is averaged over a three$-$year period

$1.$ To comply with the MCOB rules, the adviser must tell Justin and Angela:

a$.$ about the product range they can advise, on$.$

b$.$ what appropriate qualifications he holds.

c$.$ the basis of their remuneration package.

d$.$ to seek independent financial advice before committing themselves

$2.$ Due to the work needed on the property, if the lender requires an undertaking, Justin must:

a$.$ carry out the repair work within a specified time frame.

b$.$ inform his buildings insurer of the work required.

c$.$ renegotiate the purchase price with the vendor.

d$.$ pay for the repairs before the full mortgage amount can be released.

$3.$ The value of Justin's repayment vehicle is less now than it was a year ago because:

a$.$ dividend tax rates have increased.

b$.$ reversionary bonus rates have reduced.

c$.$ the basic sum assured has increased.

d$.$ the unit price has steadily fallen.

$4.$ When calculating affordability, what figure is the lender most likely to use for Justin's income?

a$.47,000.$

b$.53,000.$

c$.59,000.$

d$.65,000.$

$5.$ Which of the following mortgage products the adviser has identified as worthy of consideration would be most suitable for Justin and Angela?

Each products interest is calculated daily.

a$.$ Capped rate at $4\mathrm{.}5\%$ for four years, with an early repayment charge during that period.

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

Early repayment charge: six months interest on amount redeemed within the first five years.

c$.$ Fixed rate of $3\mathrm{.}4\%$ for four years. An early repayment charge of $1\%$ for each full year remaining on the fixed term, but with a facility to overpay up to $10\%$ of loan amount per annum without penalty.

d$.$ Tracker rate currently at $2\mathrm{.}39\%$ for five years.

Early repayment charge: six months' interest on amount redeemed within the first five years, with a facility to overpay up to $10\%$ of loan amount per annum without penalty.

$6.$ Typically, how long from now will Angela need to wait before she is discharged from her bankruptcy order?

a$.6$ months.

b$.12$ months.

c$.24$ months.

d$.36$ months.

$7.$ In respect of the protection products that Justin and Angela should consider, which of the following statements is true?

a$.$ Benefits payable from a standalone critical illness policy requires the policyholder to survive for a specified period after diagnosis.

b$.$ Level term assurance can include an investment element on a unit$-$linked basis.

c$.$ Mortgage payment protection insurance providers usually require medical information for underwriting purposes.

d$.$ Whole$-$of$-$life assurance is often used to run alongside an interest$-$only mortgage.

$8.$ Which of the following statements is true in relation to Justin's accounts?

a$.$ Justin's net profit is calculated as turnover less the cost of raw materials.

b$.$ Justin's drawings from the business will be shown in the capital account.

c$.$ Justin's business assets and liabilities must be shown in the profit and loss account.

d$.$ The lender will treat Justin's business plan as an important factor in the underwriting process.