How do lenders know if you're using a loan to boost your deposit?

stator

The solicitor will ask you to show where the money came from for anti-money-laundering reasons. So you will have to show bank statements going back and they will see the loan payment come in and not go out.
They might ask why.
I'm not sure if they would tell the lender in these circumstances.

bearcat16

Sorry I want actually making a point or being sarcastic, just a little light-heartedness!

The fact is you are right in that they cannot actually know for certain where the money comes from, but they can deduce it to a degree from the information you give them. Also they ask you outright where the deposit funds came from, so if you lie about it they could say that is technically mortgage fraud.

Goldiegirl

stator wrote: »

The solicitor will ask you to show where the money came from for anti-money-laundering reasons. So you will have to show bank statements going back and they will see the loan payment come in and not go out.
They might ask why.
I'm not sure if they would tell the lender in these circumstances.

The solicitor probably would tell the lender, as the solicitor will know that the lender doesn't like the applicant borrowing money for the deposit.


There's also the possibility that the lender will ask to see proof of the deposit at some time in the underwriting process - especially if there's been a recent loan! The lenders have seen it ALL before, and it's not worth trying to sneak things past them.

idkwhattosay

Well someone could always withdraw the loan money, give it the their parents and let them send the money back as a gift later when needed and sign the legal papers stating it's a gift and that they have no interest in the property whatsoever. As long as the loan has been withdrawn from the bank account is what counts I assume, what you do with the cash shouldn't concern anyone as that can't be traced or proven. That's the conclusion I've reached after browsing online. The only question is loan+lower mortgage or no loan+higher mortgage.

Thrugelmir

idkwhattosay wrote: »

Well someone could always withdraw the loan money, give it the their parents and let them send the money back as a gift later when needed and sign the legal papers stating it's a gift and that they have no interest in the property whatsoever. As long as the loan has been withdrawn from the bank account is what counts I assume, what you do with the cash shouldn't concern anyone as that can't be traced or proven. That's the conclusion I've reached after browsing online. The only question is loan+lower mortgage or no loan+higher mortgage.

Pointing out the obvious you still have a loan. Don't treat lenders as being stupid and dumb. They've seen it all before. Nor do you want to find yourself registered with National Hunter. Lenders share information as no one wants to deal with someone that is prepared to lie.

http://www.nhunter.co.uk/

MFWannabe

You will be asked where your deposit is from both by any broker and by your solicitor. Getting deposit from a loan is a no no (unless this has changed recently)
You will need to sign solicitors paperwork to state information you are providing is accurate
When lenders check your credit history they will see the loan. Really if you changed your mind about the loan you should have cancelled it in the cooling off period.
If deposit is from your parents it is not frowned upon, but they will have to sign forms to state the money is a gift so lenders know it's not to be paid back

davidmcn

idkwhattosay wrote: »

Well someone could always withdraw the loan money, give it the their parents and let them send the money back as a gift later when needed

The solicitor will also check where the parents got their "gift" from.