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MCOB 9.7 Disclosure at the start of the contract: lifetime mortgages2

MCOB 9.7.1G

MCOB 9.7 applies to a firm when it enters into a lifetime mortgage.1

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Disclosure requirements where interest payments are required

MCOB 9.7.2R

A firm that enters into a lifetime mortgage1 with a customer where interest payments are required (whether or not they will be collected by deduction from the income from an annuity or other linked investment product) must provide the customer with the following information before the customer makes the first payment under the contract:

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  1. (1)

    the amount of the first payment required;

  2. (2)

    the amount of the subsequent payments;

  3. (3)

    the method by which the payments will be collected (for example, by direct debit or by deduction from a linked investment product such as an annuity) and the frequency of such payments and the date of collection of the first and subsequent payments;

  4. (4)

    the net amount which the customer will receive, where the interest payment is deducted from the income generated by a linked investment product such as an annuity, and the method by which this amount will be paid to the customer;

  5. (5)

    confirmation of whether in connection with the lifetime mortgage1 insurance products such as buildings and contents insurance or payment protection insurance) have been purchased through the firm;

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  6. (6)

    the first premium (and subsequent premiums where different) for insurance products purchased through the firm in connection with the lifetime mortgage;1

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  7. (7)

    confirmation of whether the insurance premiums are to be collected with the mortgage payment or separately (where the latter applies, the firm must give details or state that these will be confirmed separately);

  8. (8)

    confirmation that the lifetime mortgage1 is on an interest-only basis, and details of how the firm expects the capital to be repaid (for example, from the proceeds of the sale of the property);

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  9. (9)

    if it is possible for a payment shortfall to occur, what to do if the customer has a payment shortfall3, explaining the benefit of making early contact with the firm, providing the name, address and telephone of a contact point with the firm, and drawing the customer's attention to the arrears charges set out in the tariff of charges;

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  10. (10)

    confirmation of any linked borrowing and linked deposits that are available; and

  11. (11)

    whether the lifetime mortgage1 permits the customer to make any overpayments or underpayments of the amounts due.

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MCOB 9.7.3R

The information in MCOB 9.7.2 R must be provided to the customer in a single communication, except (5), (6) and (9) which may be provided separately.

Disclosure requirements where the regulated lifetime mortgage contract is a drawdown mortgage with fixed payments to the customer

MCOB 9.7.4R

A firm that enters into a lifetime mortgage1 which is a drawdown mortgage, with fixed payments to the customer, must provide the customer with the following information before the first payment is drawn down by the customer:

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  1. (1)

    the amount of the first payment to be made;

  2. (2)

    the amount of subsequent payments, if different;

  3. (3)

    the method by which the payment will be made (for example, by transfer to the customer's bank account) and the date of issue of the first and subsequent payments;

  4. (4)

    confirmation of whether in connection with the lifetime mortgage1 insurance products such as buildings and contents insurance or payment protection insurance) have been purchased through the firm;

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  5. (5)

    the first premium (and subsequent premiums where different) for insurance products purchased through the firm in connection with the lifetime mortgage;1

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  6. (6)

    confirmation of the method and date of collection of the premiums for insurance products purchased through the firm;

  7. (7)

    details of how the firm expects the capital and interest to be repaid (for example from the proceeds of the sale of the property);

  8. (8)

    confirmation of any linked borrowing and linked deposits that are available; and

  9. (9)

    whether the lifetime mortgage1 permits the customer to make any repayments on the lifetime mortgage 1

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MCOB 9.7.5R

The information in MCOB 9.7.4 R must be provided to the customer in a single communication, except (4), (5) and (6) which may be provided separately.

MCOB 9.7.6R

Where the lifetime mortgage1 is a drawdown mortgage and the customer can choose the amount and frequency of the payments they receive, or the amount and frequency of payments can vary for other reasons (for example in line with interest rates) the firm must provide the customer with the following information before the first payment is drawn down by the customer:

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  1. (1)
    1. (a)

      where the customer can choose the amount and frequency of the payments they receive, details of any limitations to the amount and frequency of the payments which the customer may request; or

    2. (b)

      where the amount and frequency of payments can vary for other reasons (for example in line with interest rates), the amount of the first payment and details of how the amount and frequency of the payments can be varied in future;

  2. (2)

    the method by which the payment will be made (for example, by transfer to the customer's bank account);

  3. (3)

    confirmation of whether in connection with the lifetime mortgage1 insurance products such as buildings and contents insurance or payment protection insurance) have been purchased through the firm.

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  4. (4)

    the first premium (and subsequent premiums where different) for insurance products purchased through the firm in connection with the lifetime mortgage;1

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  5. (5)

    confirmation of the method and date of collection of the premiums for insurance products purchased through the firm;

  6. (6)

    details of how the firm expects the capital and interest to be repaid (for example from the proceeds of the sale of the property;

  7. (7)

    confirmation of any linked borrowing and linked deposits that are available; and

  8. (8)

    whether the lifetime mortgage.1permits the customer to make any repayments on the lifetime mortgage.1

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MCOB 9.7.7R

The information in MCOB 9.7.6 R must be provided to the customer in a single communication, except (3), (4) and (5) which may be provided separately

Disclosure requirements where a lump sum payment is made to the customer and interest is rolled up

MCOB 9.7.8R

Where thelifetime mortgage1 provides for a lump sum payment to be made to the customer, and all or part of the interest will be rolled up during the life of the mortgage, the firm must provide the customer with the following information before the customer makes the first payment under the contract, or if no payments are required from the customer, within seven days of completion of the mortgage:

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  1. (1)

    if no payments are required from the customer, confirmation that no payments are required and details of how the firm expects the capital and interest to be repaid (for example from the proceeds of the sale of the property);

  2. (2)

    if payments are required from the customer:

    1. (a)

      the amount of the first payment required;

    2. (b)

      the amount of the subsequent payments;

    3. (c)

      the method by which the payments will be collected, the frequency of such payments and the date of collection of the first and subsequent payments; and

    4. (d)

      what to do if the customer has a payment shortfall3, explaining the benefit of making early contact with the firm, providing the name, address and telephone of a contact point with the firm, and drawing the customer's attention to the arrears charges set out in the tariff of charges;

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  3. (3)

    confirmation of whether in connection with the lifetime mortgage1 insurance products such as buildings and contents insurance or payment protection insurance) have been purchased through the firm.

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  4. (4)

    the amount of the first premium (and subsequent premiums where different) for insurance products purchased through the firm in connection with the lifetime mortgage;1

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  5. (5)

    confirmation of the method and date of collection of the premiums for insurance products purchased through the firm in connection with the lifetime mortgage;1

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  6. (6)

    confirmation of any linked borrowing and linked deposits that are available; and

  7. (7)

    whether the lifetime mortgage1 permits the customer to make any overpayments or underpayments of the amounts due.

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MCOB 9.7.9R

The information in MCOB 9.7.8 R must be provided to the customer in a single communication, except (3) (4) and (5) which may be provided separately

Record keeping requirements

MCOB 9.7.10R
  1. (1)

    A firm must make and retain an adequate record of the information that it provides to each customer at the start of the lifetime mortgage1 in accordance with this section.

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  2. (2)

    The record required by (1) must be maintained for a year from the date that the information is provided to the customer.