MRT1 LO3: Types of borrower and who cannot borrow

Different borrowers need different products, attract different levels of regulatory protection and face different lending criteria. LO3 of the CeMAP® MRT1 unit asks you to recognise the main borrower types, what each typically needs, and which factors make borrowing difficult or impossible.

1. Private, residential and second charge borrowers

These are the core of the regulated market. Their loans are usually regulated mortgage contracts (RMCs) and get full MCOB protection.

Borrower	Typical needs and issues
First-time buyer	Small deposit, high loan-to-value (LTV), help with costs; SDLT first-time buyer relief in England and NI (none in Wales)
Home mover	Porting or replacing an existing mortgage, possible early repayment charges, timing of sale and purchase
Remortgagor	Better rate at the end of a deal, capital raising, consolidation; may be eligible for modified affordability (MCOB 11.9) if not borrowing more
Further advance	Extra borrowing from the existing lender; full affordability applies to the new borrowing
Second charge borrower	Wants to raise money without disturbing a good first mortgage rate or paying an early repayment charge; often for home improvements or debt consolidation

Second charge borrowers should be told that a second charge is usually more expensive than the first mortgage, ranks behind it on sale or repossession, and turns unsecured debt into debt secured on the home.