CeMAP - Certificate in Mortgage Advice and Practice Equity Release and Later Life Lending Flashcards
6 cards from real CEMAP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CeMAP - Certificate in Mortgage Advice and Practice Equity Release and Later Life Lending flashcards as text
What is 'roll-up interest' in the context of a lifetime mortgage?
Answer: Interest that is added to the outstanding loan balance each month rather than being paid by the borrower
Roll-up interest means the monthly interest is added to the loan balance rather than paid, causing the debt to compound over time.
What does the 'no negative equity guarantee' mean for equity release customers?
Answer: A guarantee that the total amount owed will never exceed the value of the property when it is sold
The no negative equity guarantee, a key Equity Release Council standard, ensures that neither the borrower nor their estate will owe more than the property sells for.
Which organization sets voluntary product standards and consumer protections for equity release in the UK?
Answer: The Equity Release Council
The Equity Release Council is the industry body that sets standards such as the no negative equity guarantee and the right to remain in the property for life.
What is a 'drawdown lifetime mortgage'?
Answer: A lifetime mortgage where the borrower can draw funds from a pre-agreed facility in stages as needed
A drawdown facility allows borrowers to take only what they need at the time, with the remainder available for future withdrawals, reducing interest accumulation.
How does compound roll-up interest affect the total debt on a lifetime mortgage over time?
Answer: The total amount owed increases over time because interest is charged on interest already added to the balance
Because interest is added to the loan balance and then interest is charged on that larger balance, the debt grows exponentially through compounding.
What is the key financial advantage of a drawdown lifetime mortgage compared to a lump-sum lifetime mortgage?
Answer: Interest is only charged on funds actually drawn, so the overall cost can be significantly lower
By only drawing funds as needed, the borrower minimizes the balance on which roll-up interest accrues, reducing the overall cost of borrowing.