CeMAP Module 3 (ASEW) cheat sheet

Fact-find sequence: establish needs and objectives, collect personal and financial data (income, commitments, assets, liabilities), assess attitude to risk, then research and recommend; document reasons for every recommendation.

Affordability under MCOB 11.6: assess whether the customer can afford repayments now and after plausible future rate rises; stress-test variable and discounted products against a stressed rate.

Income evidence hierarchy: employed - payslips and P60; self-employed - SA302s or tax year overviews plus accounts, typically two to three years; contract or zero-hours income is assessed on a sustainable basis.

Suitability report must state the customer's needs and objectives, why the recommended product meets them, why alternatives were rejected, and any risks and costs the customer should understand.

Repayment affordability uses net disposable income after committed outgoings; lenders apply an income multiple cap and an interest-coverage or stressed payment test, whichever is stricter.

Vulnerability indicators (health, bereavement, debt distress, low financial capability) require adjusted communication and documented reasonable adjustments; Consumer Duty requires fair outcomes for these customers.

Record-keeping: advice files and suitability evidence are retained for the period set by the firm's policy and at least the regulatory minimum, so that the recommendation can be reconstructed later.

Repayment mortgage: each payment covers interest plus capital, so the balance falls to zero at term end; interest-only: payments cover interest only, and a repayment vehicle must clear the capital.

Fixed rate gives payment certainty for the fix period and typically carries early repayment charges (ERCs) during that period; tracker follows a reference rate plus a margin; variable/discount rates move with the lender's SVR less a discount.

APR (annual percentage rate) includes the interest rate plus certain fees, so it is a comparison measure across products; the headline rate alone is not comparable when fees differ.

Typical fees: arrangement/product fee (often added to the loan, so interest is paid on it), valuation fee, legal fee, booking fee, and higher lending charge on high loan-to-value borrowing.

Loan-to-value (LTV) = loan ÷ property value × 100; lower LTV bands usually attract lower rates, so a small deposit increase can cross a pricing band.

ERC structures commonly apply a percentage of the outstanding balance or original loan, tapering over the fix period; portability lets a borrower move the product to a new property subject to lender criteria.

Overpayment rules: check the annual overpayment allowance (often around 10% of balance) and whether ERCs apply above it; underpayment and payment holidays require lender consent and are recorded on file.

Term assurance pays a lump sum on death within the term; decreasing term assurance matches a repayment mortgage balance; level term suits interest-only or family protection needs.

Critical illness cover pays a lump sum on diagnosis of a defined condition meeting the policy definition; it is not the same as income protection, which replaces a proportion of income during incapacity.

Income protection typically pays up to around 50-70% of gross income after a deferred period; benefit is usually taxable if paid by the employer and tax-free if personally funded.

Buildings insurance is normally a condition of the mortgage; the lender's interest must be noted, and sum insured should reflect rebuild cost, not market value.

Payment protection insurance (PPI) is largely a legacy product; advice must consider whether protection is needed and suitable rather than automatically bundling it with the mortgage.

Protection advice requires the same suitability standard as mortgage advice: assess need, affordability, occupation and existing cover, and record why the product was recommended.

Trusts: placing term assurance in trust can keep the payout outside the estate and speed payment to beneficiaries; the adviser should flag trust wording and recommend legal advice where needed.

FCA principles for businesses include integrity, skill and care, consumer duty to act with due care, fair treatment, and clear communication; the Consumer Duty requires good outcomes across products, price and value, consumer understanding and support.

MCOB (Mortgage and Home Finance: Conduct of Business sourcebook) governs mortgage advice, disclosure, affordability, arrears handling and repossessions; advisers must be appropriately qualified and supervised.

TCF (Treating Customers Fairly) outcomes include clear information before, during and after sale, products fit for purpose, and no unreasonable post-sale barriers.

Complaints must be acknowledged and handled within the firm's process; the customer can escalate to the Financial Ombudsman Service (FOS) after the firm's final response or after the statutory time limit.

FOS awards are typically capped at the statutory limit per complaint; the Financial Services Compensation Scheme (FSCS) protects eligible deposits and certain claims up to set limits.

Disclosure: the initial disclosure document (IDD) or equivalent sets out the firm's status, services, fees and whether the adviser is independent or restricted; it is given before advice.

Vulnerable customers and fair treatment: firms must identify vulnerability, adapt the service, and keep records; the Consumer Duty explicitly requires no foreseeable harm.

Customer due diligence (CDD) requires identity verification and, where relevant, verification of source of funds and source of wealth before the transaction proceeds.

Enhanced due diligence (EDD) applies to higher-risk cases: politically exposed persons (PEPs), high-risk jurisdictions, complex ownership structures and unusual transaction patterns.

Source of funds explains where the money for this transaction came from; source of wealth explains how the customer's overall wealth was accumulated - both must be evidenced and recorded.

Suspicious activity reports (SARs) go to the National Crime Agency (NCA) via the firm's nominated officer; tipping off the customer is a criminal offence.

Record-keeping under money laundering rules: CDD records and transaction records are retained for the statutory period (generally five years after the relationship ends) and made available to authorities.

Data protection: UK GDPR and the Data Protection Act 2018 require lawful basis, data minimisation, accuracy, retention limits and secure handling; subject access requests must be answered within the statutory period.

Financial crime includes fraud, bribery and sanctions breaches; firms must screen against sanctions lists and report suspicions, and staff must not accept unexplained cash or third-party payments.

Freehold vs leasehold: freehold owns the property and land; leasehold grants a term of years subject to ground rent and service charges, and lease length affects lender criteria.

Title and tenure checks: unregistered land, restrictive covenants, flying freeholds and short leases (often under 70-80 years remaining) can restrict lending or require specialist lenders.

Stamp duty land tax (SDLT) in England and Northern Ireland, and equivalent devolved taxes in Scotland (LBTT) and Wales (LTT), are tiered; an additional surcharge applies to additional dwellings.

Capital gains tax can apply on disposal of a property that is not the main residence; private residence relief may reduce or eliminate the gain on the main home.

Mortgage interest relief for residential landlords is restricted to a basic-rate tax credit rather than a full deduction, which changes the net return calculation.

Legal process: searches (local authority, environmental, drainage), survey, exchange of contracts (binding), completion, and registration of the lender's charge at HM Land Registry.

Inheritance tax: the nil-rate band plus residence nil-rate band can apply to an estate; property held jointly and trusts affect how the estate is taxed, so specialist tax advice may be needed.

Buy-to-let affordability is assessed on rental cover: rental income must typically cover 125-145% of the interest payment at a stressed rate, depending on tax band and lender criteria.

Buy-to-let lenders usually require a minimum income, minimum property value and maximum LTV, and may apply portfolio or landlord-experience criteria.

Equity release: lifetime mortgage (a loan secured on the home, with interest rolled up) vs home reversion (selling a share of the property at a discount); both require regulated advice.

Equity release safeguards: the no-negative-equity guarantee, the right to remain in the home for life, and the option to make voluntary payments; the customer must receive regulated advice and usually a solicitor's certificate.

Shared ownership: the buyer purchases a share and pays rent on the remainder; staircasing increases the share; lenders assess affordability on the share plus rent plus service charge.

Later-life lending criteria: maximum age at application and at term end, minimum income (often from pensions), and health and lifestyle questions can affect eligibility.

Specialist and adverse-credit lending: lenders price for risk and may require larger deposits, evidence of cleared defaults or a longer clean credit history; document the rationale for the recommendation.

Case-study method: identify the customer's stated and underlying needs, test affordability, match product features to needs, compare alternatives, and record the rationale for the chosen product.

When facts conflict (e.g., stated income vs evidence), resolve the discrepancy before recommending; do not rely on unverified figures in the affordability assessment.

If a customer insists on an unaffordable or unsuitable product, document the advice given and the customer's decision; the adviser's duty is to give suitable advice, not to execute an unsuitable instruction.

Interest-only cases require a credible repayment strategy; verify the vehicle, its expected value and the timescale, and record it on the file.

Vulnerability or changed circumstances mid-case (job loss, illness, divorce) trigger a re-assessment of affordability and suitability before completion.

Escalation rules: refer to a specialist or compliance when the case involves equity release, complex income, adverse credit, trusts or potential money laundering indicators.

Professional judgement is evidenced by a clear audit trail: fact-find, research, suitability letter, customer acknowledgement and any deviations with reasons.