Proof of Deposit

Holfer

How likely are a lender/ solicitor to check the source of funds for a deposit of £6250 ( 5%)?

AndyGuil

They will check all deposits thoroughly.

StuC75

will possibly want sight of bank statements showing the balance building up & maybe copies of statements for the source account.. I.e. to see a 'trail' of where the funds have come via - money laundering \ confirming its not via a loan etc..

Holfer

Thank you.

As it is, our close friend has gifted us the money. Does it matter if that person has taken out a loan to help us?

laidbackgjr

As long as the person who has gifted the money to you put's it in writing that the money is a gift and doesn't ever require you to repay them, then there source of funds is not important for your purchase.

AndyGuil

The solicitor will still want to see the source of the money from your friend so they can satisfy money laundering checks.

GMS

Gifts from non family will cause issues.

Check with the lender prior to paying any fees etc.

Holfer

okay. So as I understand:

a) they could accept a loan as the method of the gift but the gifter would need to show this- like need to show a bank statement?
b) would have to clarify that the lender would accept a non-family member.

Hope I have this correct! it is so complicated!

Thank you for all your help so far.

Thrugelmir

Gifts from non related sources are the issue.

In extreme circumstances the creditors of your friend could recover the debt by forcing the sale of your property. Thereby causing the lender a loss. (Insolvency Act 1986).

GMS

Gifts from family are generally acceptable. Non family are generally not.

Why would a friend want to take a loan to give to you for a deposit? Doesn't stack up.

holly_hobby

Solicitor has to check the source of all deposits under Money Laundering Regs.

You declare its from a friend, and a non-conditional gift (ie made without reservation or requirment of repayment).

The insolvency issues are relevant even if the gift is from a family member - and many solicitors insist on an bankrupcty indemnity policy being effected to this end.

This really smacks of you requiring a loan to source your deposit, but don't want the monthly commitments coming off your income during the mge assessment - so have roped your friend in .... this may not be an accurate reflection of the exercise, but if it looks like this to me, it will certainly do so to an underwriter.

Moreover, lenders will only accept gifted deposits from immediate family members (given its highly unlikely that a friend or extended family, would simply gift £1000's to help another buy a property, for no return or consideration). So although you're worrying about they getting a loan being the issue the lender will have, its actually the fact that the funds in question are from your friend that is the real hurdle you'll fall at.

The lender may not ask at application what/whom the source of deposit is from , but at some point during the conveyencing the solicitor will - and there will lie your problem, probably after you're incurred search and professional fees ...... so you'll be out of pocket without being able to proceed to exchange & completion.

Sorry this won't be what you wanted to hear, but hope helps .....

Holly x