Where can my mortgage deposit come from?
Published 25th November 2017
Every mortgage borrower and property purchaser is now asked where their deposit has come from, not because people are nosey, but because the lenders and solicitors want to know – They have strict anti-money laundering regulation and guidelines to follow to ensure deposits are from legal sources. Where your deposit is from is a vital piece of info in the mortgage selection process - some lenders accept sources where others would decline. For this reason your advisor will need to be aware of this from the start to avoid being placed with the wrong lender.
For reference, see the table below for the most common deposit sources currently acceptable to lenders in the UK.
Acceptable sources of deposit for mortgages
|Own personal savings / investments||Every lender is happy with this, although some are picky and require the proof of your increasing balance over time.|
|Gift||Usually required to be from a family member (parents, grand-parents, siblings, uncles, aunts, step family etc), although in certain circumstances one or two lenders may well accept a gift from someone not related (such as a close family friend or other explainable source). Gifts from a third party are usually NOT acceptable because of the risk of money laundering and fraud. Enhanced due diligence checks will usually take place looking into the source of funds and sometimes ID verification checks on the donor can even be required.|
|Inheritance||Most lenders will accept this without problem.|
|Sale of property||Usually no problem so long as the property proceeds aren’t under charge by someone else. Obviously they must be clear funds at the time of completion.|
|Sale of other assets||Other assets such as cars, boats, valuable memorabilia, artwork, or just about anything legal that is to be sold, should be fine to use as deposit with most lenders. The issue is when there is the suspicion of money laundering, as lenders, advisors, and solicitors have a duty to ensure all funds are from a legitimate source.|
|Unsecured borrowing||Unsecured borrowing means credit cards and personal loans etc. and raising deposit using them will NOT be acceptable with most lenders. One or two are happy with it – including some mainstream lenders.|
|Bridging finance||Bridging finance is very short term borrowing which enables customers who need to buy before they sell, or who are buying on a very short term basis. It’s a pricey arrangement with rates between 1-3% a month! (@ 2% a 100k loan = 2k a month!).|
|Gambling win||Be careful with this. Some lenders may have an issue with this if gambling is a regular occurrence. It has been known for lenders to go through bank statements and deduct regular gambling withdrawals as monthly commitments, deducting this from available income and influencing affordability, even if you regularly win!|
|Deposit from overseas||This is a tricky one for most lenders because it can be really difficult to trace the origin of the cash in order to be satisfied it’s legitimate and not at risk of money laundering. As a result, you may find many lenders declining the application. Some lenders do have a flexible approach and will consider overseas deposits if for instance they are in established bank accounts and the money can be traced from a legitimate source. This is really on a case by case basis so get in touch if you have more questions and want to know which lenders will consider your application.|
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