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CeMAP Module 3 (ASEW) study materials
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CeMAP Module 3 (ASEW) practice questions

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Question 1Mortgage advice process and client interaction (fact-finding, affordability, suitability)

During a fact-find, a lender's affordability assessment must consider which of the following?

  1. Only the applicant's current monthly mortgage payment
  2. The applicant's net income, committed expenditure and credit commitments Correct answer.
  3. The applicant's savings balance at application
  4. The applicant's employment history only

Explanation

An affordability assessment compares verified net income against committed expenditure, credit commitments and basic living costs. It is not limited to a single figure such as the proposed payment, savings or employment history alone.

Question 2Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client refuses to disclose their partner's income during a joint application. What is the adviser's most appropriate action?

  1. Proceed using only the applicant's income and record the omission
  2. Advise the client to apply as a sole applicant without further discussion
  3. Explain that the lender cannot complete a joint affordability assessment without it Correct answer.
  4. Estimate the partner's income from household spending patterns

Explanation

A joint application requires both applicants' income and commitments to be verified for affordability. The adviser should explain the consequence of non-disclosure rather than guess or silently proceed.

Question 3Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which document best evidences a self-employed applicant's income for a lender's affordability assessment?

  1. An unaudited profit projection prepared by the applicant
  2. A letter from a family member confirming earnings
  3. SA302 tax calculations supported by tax year overviews Correct answer.
  4. A personal bank statement showing a single large deposit

Explanation

Lenders typically require SA302 calculations with corresponding tax year overviews to verify self-employed income. These are independently generated records of declared income.

Question 4Mortgage advice process and client interaction (fact-finding, affordability, suitability)

An adviser is completing a fact-find with a client who plans to retire in three years. Which information is most relevant to the suitability of the recommended term?

  1. The colour scheme of the client's current home
  2. The client's intended retirement age and expected post-retirement income Correct answer.
  3. The client's preferred mortgage payment date
  4. The name of the client's current electricity supplier

Explanation

Retirement age and post-retirement income determine whether repayments remain affordable for the proposed term. A term extending beyond retirement requires evidence that income will continue.

Question 5Mortgage advice process and client interaction (fact-finding, affordability, suitability)

What is the primary purpose of the affordability assessment under mortgage conduct rules?

  1. To establish the lender's maximum loan-to-value ratio
  2. To determine the arrangement fee payable
  3. To confirm the property valuation is accurate
  4. To ensure the borrower can repay without undue reliance on rising property values Correct answer.

Explanation

Affordability rules require lenders to assess whether the borrower can repay the loan and withstand potential interest rate rises. The assessment is not a substitute for valuation or pricing decisions.

Question 6Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client's fact-find shows significant credit card balances with high minimum payments. How should the adviser treat these in the affordability discussion?

  1. Treat them as savings because the balances could be cleared
  2. Include the contractual and realistic repayments as committed expenditure Correct answer.
  3. Deduct them from the deposit rather than from income
  4. Ignore them because they are unsecured

Explanation

Existing credit commitments reduce the income available for mortgage repayments and must be included as committed expenditure. Lenders consider both contractual payments and realistic repayment patterns.

Question 7Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following best describes a 'committed expenditure' in a mortgage affordability assessment?

  1. Discretionary spending on entertainment
  2. One-off costs associated with moving house
  3. Optional pension contributions
  4. Regular outgoings that the borrower is contractually obliged to pay Correct answer.

Explanation

Committed expenditure covers regular contractual outgoings such as loan repayments, childcare and council tax. Discretionary spending is considered separately within overall expenditure analysis.

Question 8Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A lender's stress test applies an interest rate higher than the initial product rate. What is the main reason for this?

  1. To calculate the early repayment charge
  2. To determine the property's market value
  3. To assess whether the borrower could still afford repayments if rates rise Correct answer.
  4. To cover the lender's administration costs

Explanation

Stress testing checks affordability against a higher rate to reflect the risk of future interest rate increases. It protects borrowers from overstretching at an initial low rate.

Question 9Mortgage advice process and client interaction (fact-finding, affordability, suitability)

During a fact-find, a client mentions a bonus received in two of the last three years. How should the adviser generally treat this income?

  1. Exclude it entirely because it is not guaranteed
  2. Add it to the deposit rather than to income
  3. Include the full amount of the highest bonus as guaranteed income
  4. Include it only if the employer confirms it will recur, with supporting evidence Correct answer.

Explanation

Bonus income is variable and lenders typically require evidence of a pattern plus employer confirmation of continuation. It may be considered but is usually not treated as guaranteed.

Question 10Mortgage advice process and client interaction (fact-finding, affordability, suitability)

What does the 'interest-only' repayment method require the adviser to establish during the fact-find?

  1. That the client has no other borrowing
  2. That the client will never make overpayments
  3. That the client has a credible repayment vehicle in place Correct answer.
  4. That the property will definitely increase in value

Explanation

Interest-only mortgages require a credible repayment strategy to repay the capital at the end of the term. The adviser must establish and record the vehicle and its expected proceeds.

Question 11Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client states they want the lowest possible monthly payment and are comfortable with the risk of variable rates. Which recommendation approach best reflects suitability?

  1. Recommend the product with the longest term to minimise payments
  2. Decline to advise because variable rates are involved
  3. Consider a variable or tracker product and explain the risk of payment increases Correct answer.
  4. Recommend a fixed-rate product regardless of the client's stated preference

Explanation

Suitability requires matching the recommendation to the client's stated needs and attitude to risk. A variable or tracker product may be suitable if the risks are clearly explained and accepted.

Question 12Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following is the most appropriate way to record a client's attitude to risk during a fact-find?

  1. Rely on the product the client has already seen advertised
  2. Infer it from the client's income level
  3. Use a documented risk discussion and record the client's responses Correct answer.
  4. Assume a medium attitude unless the client objects

Explanation

Attitude to risk should be established through a documented discussion and recorded accurately. Assumptions or inferences are not a reliable basis for suitability.

Question 13Mortgage advice process and client interaction (fact-finding, affordability, suitability)

An adviser discovers during the fact-find that the client has a default registered four years ago. What is the most appropriate action?

  1. Disclose it to the lender and discuss which products may be available Correct answer.
  2. Record it but proceed as if the client had a clean credit history
  3. Advise the client to apply elsewhere without mentioning it
  4. Ignore it because it is more than three years old

Explanation

Adverse credit must be disclosed honestly and considered when identifying suitable products. Concealment risks rejection and potential fraud.

Question 14Mortgage advice process and client interaction (fact-finding, affordability, suitability)

What is the key difference between a 'needs' and an 'objectives' discussion in the mortgage advice process?

  1. Needs are set by the lender; objectives are set by the adviser
  2. Needs relate to the property; objectives relate to the lender
  3. Needs are the client's requirements; objectives are the outcomes the client wants to achieve Correct answer.
  4. There is no meaningful difference

Explanation

Needs describe what the client requires, such as a home to live in, while objectives describe the outcomes they seek, such as repaying the mortgage before retirement. Both inform suitability.

Question 15Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client wants to borrow jointly with a friend but the friend will not be living in the property. Which issue is most relevant to the advice?

  1. The lender's criteria for non-occupying borrowers and the friend's status as a party to the mortgage Correct answer.
  2. The friend's credit history is irrelevant because they will not occupy
  3. The property's energy performance rating
  4. The friend's preferred mortgage payment date

Explanation

A non-occupying joint borrower affects lender criteria and the legal structure of the mortgage. The adviser must establish the friend's status and the lender's requirements.

Question 16Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following best describes 'disposable income' in the context of mortgage affordability?

  1. The total value of the client's savings
  2. Income remaining after tax, National Insurance and committed expenditure Correct answer.
  3. The amount of the mortgage advance
  4. Gross income before tax and National Insurance

Explanation

Disposable income is what remains after tax, National Insurance and committed outgoings. It indicates the capacity to meet mortgage payments and absorb rate changes.

Question 17Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client's income includes rental receipts from a buy-to-let property. How should the adviser generally treat these?

  1. Ignore them because they relate to another property
  2. Include them as income subject to evidence and lender criteria Correct answer.
  3. Treat them as a deposit contribution
  4. Count them only if the property is sold

Explanation

Rental income can support affordability where it is evidenced and accepted under lender criteria. It is not automatically excluded or treated as capital.

Question 18Mortgage advice process and client interaction (fact-finding, affordability, suitability)

What is the purpose of the 'reason why' letter in the mortgage advice process?

  1. To explain why the lender declined the application
  2. To record why the recommended product is suitable for the client Correct answer.
  3. To set out the lender's complaints procedure
  4. To confirm the property valuation figure

Explanation

The reason why letter documents the rationale for the recommendation and demonstrates suitability. It supports the client's understanding and the adviser's record.

Question 19Mortgage advice process and client interaction (fact-finding, affordability, suitability)

An adviser recommends a five-year fixed rate to a client who intends to move home in two years. Which concern is most relevant?

  1. The lender will automatically reduce the loan on sale
  2. The client will lose their deposit
  3. The fixed rate will prevent the client from selling the property
  4. Early repayment charges may apply if the mortgage is redeemed during the fixed period Correct answer.

Explanation

A fixed-rate product often carries early repayment charges during the fixed period, which can make an early move costly. The adviser should discuss this with the client.

Question 20Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following is the most appropriate source to verify a PAYE applicant's income?

  1. A reference from a neighbour
  2. A utility bill
  3. A verbal statement from the applicant
  4. Recent payslips and the latest P60 Correct answer.

Explanation

Payslips and P60s provide documentary evidence of PAYE income. Lenders use these to verify the level and stability of earnings.

Question 21Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client has a large pension lump sum due in five years and wants to use it to repay the mortgage. How should the adviser treat this in the suitability discussion?

  1. Ignore it because pensions cannot be used for mortgage repayment
  2. Assume it will be used to increase the deposit
  3. Rely on it as the sole repayment strategy without further evidence
  4. Discuss it as a possible repayment vehicle and verify the expected amount and timing Correct answer.

Explanation

A pension lump sum can be considered as a repayment vehicle where its amount and timing are verified. It should not be assumed without evidence.

Question 22Mortgage advice process and client interaction (fact-finding, affordability, suitability)

What does 'forbearance' mean in the context of mortgage arrears?

  1. The lender agrees a temporary arrangement to help the borrower manage arrears Correct answer.
  2. The lender immediately repossesses the property
  3. The borrower's debt is written off entirely
  4. The borrower is transferred to a new lender

Explanation

Forbearance is a temporary arrangement, such as reduced payments or a payment holiday, agreed to help a borrower manage arrears. It is not the same as writing off debt.

Question 23Mortgage advice process and client interaction (fact-finding, affordability, suitability)

An adviser is considering a product for a client with a small deposit and a limited credit history. Which approach best reflects the advice process?

  1. Recommend a product based only on the lowest arrangement fee
  2. Advise the client to wait until they have a larger deposit without discussion
  3. Recommend the first product that accepts the application
  4. Compare suitable products and explain the trade-offs, including higher rates Correct answer.

Explanation

The advice process requires comparing suitable products and explaining the trade-offs to the client. A limited deposit and credit history may mean higher rates or restricted options.

Question 24Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following best describes the role of the 'key facts' document in the mortgage advice process?

  1. It guarantees the mortgage will be approved
  2. It sets out the adviser's status, services and the scope of advice Correct answer.
  3. It confirms the property's title
  4. It replaces the affordability assessment

Explanation

Key facts documentation explains the adviser's status, the service offered and the scope of advice. It supports informed decision-making by the client.

Question 25Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client's expenditure includes regular payments to a private medical scheme. How should the adviser treat this in the affordability discussion?

  1. Add it to the deposit
  2. Exclude it because it is optional
  3. Include it as a regular commitment if the client intends to continue it Correct answer.
  4. Treat it as a one-off cost

Explanation

Regular outgoings the client intends to maintain form part of expenditure analysis. Excluding them would overstate disposable income.

Question 26Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which document must be provided to a client at the outset of the mortgage advice process, setting out the scope of the adviser's service and the basis of remuneration?

  1. The European Standardised Information Sheet
  2. The mortgage offer
  3. The initial disclosure document Correct answer.
  4. The suitability report

Explanation

The initial disclosure document is given early in the process and explains the service offered, whether the adviser is independent or restricted, and how the adviser is paid. The ESIS and mortgage offer come later from the lender, and the suitability report follows the recommendation.

Question 27Mortgage advice process and client interaction (fact-finding, affordability, suitability)

An adviser is completing a fact-find with a self-employed client in their second year of trading. Which approach best reflects sound practice when establishing income?

  1. Average the profits shown on the tax calculations and SA302s available, and consider lender policy on trading history Correct answer.
  2. Rely on the client's projected turnover for the coming year
  3. Use gross turnover without deducting business expenses
  4. Use the latest full year's net profit as the sole income figure

Explanation

Lenders generally assess self-employed income from the figures verified by HMRC documents such as SA302s and tax calculations, often averaged over a period, and many require a minimum trading history. Projections and turnover alone do not evidence sustainable income.

Question 28Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client tells the adviser they would be uncomfortable if their monthly payment rose at all, even slightly. Which product feature most directly addresses this stated preference?

  1. A tracker rate with a cap
  2. A discounted variable rate
  3. A variable rate with a collar
  4. A fixed rate for the full term Correct answer.

Explanation

A rate fixed for the whole mortgage term guarantees the payment stays the same for the life of the loan, which matches a client who will not tolerate any increase. Capped, collared and discounted variable products all permit some movement in the payment.

Question 29Mortgage advice process and client interaction (fact-finding, affordability, suitability)

During fact-finding a client reveals they are the guarantor on a sibling's personal loan. How should the adviser treat this commitment?

  1. Deduct the full outstanding loan balance from the client's deposit
  2. Ignore it because the client is not the borrower making the payments
  3. Treat it as the client's own unsecured debt in every case
  4. Record it as a contingent liability that may affect affordability Correct answer.

Explanation

A guarantee is a contingent liability: the client may become liable if the sibling defaults, so it should be recorded and considered for its potential impact on affordability. It is not certain expenditure, nor is it automatically treated as the client's own debt.

Question 30Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following best describes the purpose of the affordability assessment required under mortgage rules?

  1. To check the borrower's identity and address history
  2. To determine the maximum loan the lender is willing to advance
  3. To confirm the property valuation supports the loan amount
  4. To assess whether the borrower can afford the mortgage both now and if rates rise Correct answer.

Explanation

Affordability rules require lenders to assess whether the borrower can afford the mortgage now and under a stressed higher rate, taking account of income, credit commitments and essential expenditure. It is distinct from valuation, identity checks and the lender's own lending limits.

Question 31Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client's fact-find shows they spend a substantial sum each month on childcare for two children. How should the adviser treat this in the affordability assessment?

  1. Include it as essential expenditure for as long as it is expected to continue Correct answer.
  2. Treat it as a credit commitment
  3. Deduct it from the loan term rather than from income
  4. Exclude it because it is a temporary cost

Explanation

Childcare is a regular, unavoidable cost that reduces the income available to service a mortgage, so it belongs in essential expenditure for the period it is expected to last. It is neither a credit commitment nor something to be excluded.

Question 32Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following is the most appropriate way for an adviser to establish a client's future plans that could affect the mortgage?

  1. Rely solely on the information in the lender's application form
  2. Ask only whether the client intends to sell the property
  3. Ask open questions about plans for work, family and the property over the next few years Correct answer.
  4. Assume the client's circumstances will remain unchanged

Explanation

Open questions about work, family and property plans allow the client to disclose changes that could affect term, product or affordability. Assuming no change or relying only on the application form risks missing material information.

Question 33Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client is due to retire in three years and wants a 25-year mortgage term. What is the most significant suitability issue for the adviser to address?

  1. Whether the lender charges a product fee
  2. Whether the property is leasehold or freehold
  3. How the mortgage will be repaid once the client's earned income stops Correct answer.
  4. Whether the client has a valid passport

Explanation

The adviser must establish how repayments will be met after retirement, since the client's earned income will cease while the mortgage continues. This is central to affordability and suitability over the full term.

Question 34Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following best explains why an adviser should document a client's reasons for preferring a particular product feature?

  1. It evidences that the recommendation reflects the client's needs and circumstances Correct answer.
  2. It satisfies the lender's valuation requirements
  3. It guarantees the client will not complain later
  4. It removes the need for a suitability report

Explanation

Recording the client's stated reasons shows the advice was based on their needs and circumstances, supporting the suitability of the recommendation. It does not replace the suitability report or affect valuation.

Question 35Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client wants to borrow into their seventies and intends to use pension income to support repayments. Which evidence is most appropriate for the adviser to obtain?

  1. The client's employment contract from a previous job
  2. A verbal assurance that the pension will be sufficient
  3. A copy of the client's will
  4. Documentary evidence of expected pension income, such as statements or forecasts Correct answer.

Explanation

Where retirement income is relied upon, lenders and advisers need documentary evidence of the expected amount, such as pension statements or forecasts, to support affordability. An assurance alone is insufficient.

Question 36Mortgage advice process and client interaction (fact-finding, affordability, suitability)

What is the primary purpose of the suitability report given to a mortgage client?

  1. To summarise the lender's underwriting criteria
  2. To record the client's identity documents
  3. To confirm the property valuation figure
  4. To explain and justify why the recommended mortgage meets the client's needs and objectives Correct answer.

Explanation

The suitability report explains the advice given and why the recommended product is suitable for the client's needs and objectives. It is a client-facing record of the recommendation, not a summary of underwriting or valuation.

Question 37Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client has savings that could cover a 20% deposit but wants to borrow 95% of the property value and keep the savings invested. What is the adviser's most appropriate course of action?

  1. Explore the reasons for the preference and explain the cost and risk implications of a higher loan-to-value Correct answer.
  2. Automatically arrange the 95% loan as requested without discussion
  3. Refuse to advise because the client's preference is unusual
  4. Insist the client uses all savings as a deposit

Explanation

The adviser should understand the client's reasoning and explain the implications of a higher loan-to-value, such as higher rates and greater interest cost, before recommending a course of action. The client's wishes should be explored, not dismissed or overridden.

Question 38Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following best describes 'vulnerability' in the context of a mortgage fact-find?

  1. A property that is in a poor state of repair
  2. A low credit score recorded by a credit reference agency
  3. A characteristic that may reduce a client's ability to make an informed decision or withstand harm Correct answer.
  4. A mortgage with a high early repayment charge

Explanation

Vulnerability refers to client characteristics, such as poor health, bereavement or low financial resilience, that may affect their ability to understand or make decisions and increase the risk of harm. It is not a credit score, property condition or product feature.

Question 39Mortgage advice process and client interaction (fact-finding, affordability, suitability)

During a fact-find a client becomes distressed when discussing a recent bereavement that has reduced household income. What is the most appropriate adviser response?

  1. Acknowledge the client's situation, adapt the pace and consider whether additional support is needed Correct answer.
  2. Continue the fact-find at the same pace to complete it in one meeting
  3. Record the client as uncooperative and close the file
  4. Omit the income change from the fact-find to avoid upsetting the client

Explanation

Recognising vulnerability means adapting the process to the client's circumstances and considering extra support, while still gathering the information needed. Ignoring distress or omitting material facts undermines both the client's wellbeing and the quality of advice.

Question 40Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following best explains why an adviser should distinguish between the client's 'wants' and their 'needs' during fact-finding?

  1. Wants take priority over needs when selecting a lender
  2. Needs drive suitability while wants inform product preference and client expectations Correct answer.
  3. Needs are recorded only after completion
  4. Wants are always unaffordable and must be disregarded

Explanation

Needs are the fundamental requirements the mortgage must meet, such as an affordable repayment method, while wants shape preferences such as product type or term. Good advice satisfies needs and manages wants within affordability.

Question 41Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client's income is paid partly in commission that has varied considerably over the last three years. How should the adviser generally treat this income?

  1. Include the highest year's commission in full
  2. Use an average of the commission received, supported by evidence, subject to lender policy Correct answer.
  3. Include commission only if the client promises it will continue
  4. Exclude commission entirely because it varies

Explanation

Variable income such as commission is generally averaged over a period and evidenced, subject to the lender's policy on acceptable income. Using the highest year overstates sustainable income, while excluding it ignores real earnings.

Question 42Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following best describes the adviser's obligation when a client insists on a product the adviser considers unsuitable?

  1. Alter the client's fact-find so the product appears suitable
  2. Arrange the product without comment to respect client choice
  3. Explain the concerns, record the client's instructions and decline to recommend the unsuitable product Correct answer.
  4. Recommend the product but omit the concerns from the file

Explanation

The adviser should explain why the product is unsuitable and document the client's instructions, but cannot recommend a product they believe is unsuitable. Altering records or concealing concerns would be dishonest and breach advice standards.

Question 43Mortgage advice process and client interaction (fact-finding, affordability, suitability)

What information is the adviser primarily seeking when asking a client about the length of time they intend to keep the mortgage?

  1. The property's lease remaining term
  2. The client's expected holding period, which informs product term and exit costs Correct answer.
  3. The client's credit score
  4. The lender's early repayment charge structure

Explanation

Understanding the expected holding period helps the adviser match product term and early repayment charges to the client's plans. It is about the client's intentions, not the lender's charges or the property's lease.

Question 44Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client's fact-find shows regular payments into a stocks and shares ISA. How should the adviser generally treat these in the affordability assessment?

  1. As a discretionary commitment that may be reduced, subject to lender policy Correct answer.
  2. As a credit commitment
  3. As income available to support the mortgage
  4. As essential expenditure that must always be deducted in full

Explanation

Regular savings and investments are generally discretionary commitments rather than essential expenditure, although lenders may still take them into account. They are neither credit commitments nor income.

Question 45Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following best describes the purpose of a 'needs and objectives' discussion at the start of the advice process?

  1. To fix the interest rate the client will pay
  2. To establish what the client wants to achieve and the constraints they face before recommending a product Correct answer.
  3. To complete the property valuation
  4. To confirm the lender's product range

Explanation

The needs and objectives discussion establishes the client's goals and constraints, such as moving home or reducing monthly cost, which frame the subsequent fact-find and recommendation. It does not determine lender products, rates or valuation.

Question 46Mortgage advice process and client interaction (fact-finding, affordability, suitability)

An adviser is assessing affordability for a client with a variable income and irregular overtime. Which approach best supports a robust assessment?

  1. Exclude overtime and assess on basic salary only in all cases
  2. Use the most recent month's total pay
  3. Use a conservative, evidenced average and test affordability against a stressed rate Correct answer.
  4. Assume overtime will continue at the same level indefinitely

Explanation

A conservative, evidenced average of variable pay, tested against a stressed rate, produces a robust affordability assessment that reflects real income without overstating it. A single month or an unverified assumption is unreliable.

Question 47Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following best explains why the adviser should ask about a client's existing mortgage when arranging a remortgage?

  1. To verify the client's identity
  2. To establish the outstanding balance, current terms and any early repayment charge Correct answer.
  3. To determine the property's council tax band
  4. To confirm the client's employment history

Explanation

For a remortgage the adviser needs to know the outstanding balance, the current product terms and whether an early repayment charge applies, as these affect the amount to be borrowed and the timing of any switch.

Question 48Mortgage advice process and client interaction (fact-finding, affordability, suitability)

A client has a small deposit, a limited credit history and no adverse credit. Which approach best reflects sound advice?

  1. Assume the client will be declined and take no further action
  2. Consider lenders and products suited to limited credit history, and explain the cost implications of a higher loan-to-value Correct answer.
  3. Advise the client to delay buying indefinitely until they have a larger deposit
  4. Recommend the first product available without comparing alternatives

Explanation

Sound advice involves matching the client's circumstances to lenders and products that accept limited credit history, while explaining the costs of a higher loan-to-value. Dismissing the client or recommending without comparison is poor practice.

Question 49Mortgage advice process and client interaction (fact-finding, affordability, suitability)

Which of the following best describes the adviser's role when explaining the difference between repayment and interest-only mortgages during fact-finding?

  1. To set the interest rate for the product
  2. To record the client's identity documents
  3. To confirm the lender's valuation figure
  4. To establish how the capital will be repaid and whether the chosen method is affordable and suitable Correct answer.

Explanation

Explaining repayment methods allows the adviser to establish how capital will be repaid and whether the method is affordable and suitable for the client. Valuation, rate-setting and identity checks are separate matters.

Question 50Mortgage advice process and client interaction (fact-finding, affordability, suitability)

During fact-finding a client mentions they expect to receive an inheritance within the next year and want to use it to reduce the mortgage. How should the adviser treat this information?

  1. Include the inheritance as certain income for affordability purposes
  2. Note it as a potential future change but do not rely on it as verified income Correct answer.
  3. Record it as a credit commitment
  4. Advise the client to borrow more in anticipation of the inheritance

Explanation

An expected inheritance is uncertain and unverified, so it should be recorded as a potential future change rather than relied upon in the affordability assessment. Borrowing more in anticipation would increase risk.