First Time Buyer, I may have messed up.

StuddedPunk

Hey all, I hope everyone Is keeping well in this hard time.
I have a question relating to proof of deposit. Me and my partner have some savings and a family member has matched it so we can use it for our deposit, let's say our total deposit is £10k. Our mortgage was successful and we are now in the home stretch, at the point to start pooling the money together to prove to the solicitors that we have the deposit. 

I think I may have messed up as we pooled together the savings from our separate savings account and the money from the family member into my main account. This main account has a 2k maxed overdraft which the mortgage company is well aware of. Since I pooled the money into this account that we will be using to pay the mortgage, it now shows up on my statement of having say £8k rather than the full £10k.

I'm very worried that this now looks like we are using overdraft money to pay for the deposit and the solicitors may refuse to work with us based on that. Even though we can prove that the £10k has been made by us and the gift. Has anyone gone through this scenario before? I would hate for us to get pushed back after we have spent ages saving and getting to thus point.

I hope this is just be worrying being a first time buyer but any information or advise you could pass along would be greatly appreciated! 

emma_829

Your solicitor will review the bank statements. As 2k of that money you deposited has paid off your overdraft; you will essentially now be re-borrowing the 2k from the overdraft toward the deposit. You really only have 8k left as you’ve given 2k back to the bank. Your solicitor will report this to the lender (they have no choice as they act for the lender as well and it’s under their obligation to the lender). If, as you say, the lender is aware then they will write to the solicitor to confirm this is ok. It will be referred back to the underwriter I imagine. 

I’d suggest both your broker and solicitor explain to the lender that this is the same debt you advised them about at the point of application. However, when you transferred the deposit to your current account in preparation for transferring to the solicitor it paid off the existing borrowing and you will have to max it again. You need to make sure they know it isn’t a different 2k of borrowing on top of what they’re already aware of. 

StuddedPunk

Many thanks for your reply, I really couldn't find any information about this on the net so was really worried. 

So our lender is more of aware of the overdraft I was in. I'm just hoping that when we said we had that 10k deposit that they realised that would be going into my bank which would offset the whole of the deposit even thought we have proof we have earned that money ourselves. 

As mentioned it was only to collect the money in one account so that we could easily show proof of deposit. I am just hoping that I haven't jeopardised the situation by doing this!

ACG

I think this could be a problem. 

You are in essence using borrowed money (the overdraft) to fund part of your deposit. Unless you have got lucky with your choice of lender, I think (the key word being think) there are only 2-3 lenders who may consider this and only one of them is a high street bank. 

I am not sure which way this will go if/when the solicitors notify the lender. I would not exchange contracts until this has been resolved though. 

StuddedPunk

Thanks ACG. Appreciate any information you can throw my way as I really cannot find any information. 

Originally we had the 10k in a separate savings account, its annoying because I could have kept it in that account and just used that as proof but to make things easy for the Solicitors I decided to place the deposit in my main account. I feel like it would now be too late to move it back to the savings account even though I have proof that we have been gifted/saved that actual 10k?

MattMattMattUK

StuddedPunk said:

Originally we had the 10k in a separate savings account, its annoying because I could have kept it in that account and just used that as proof but to make things easy for the Solicitors I decided to place the deposit in my main account. 

In reality you are going to have to show all the different bank statements anyway as they solicitor will need to establish source of funds, so they will need to see the accounts the money has moved from, going back anywhere between six months and several years, you will also need a gifted deposit letter from your family member and possibly copies of their bank statements as well.

StuddedPunk said:

I feel like it would now be too late to move it back to the savings account even though I have proof that we have been gifted/saved that actual 10k?

It possibly would be, but for now I would stop moving money around and speak to your broker and solicitor first, all that you are doing by moving the money around is making it more time consuming to establish the source of funds, moving again would also probably be regarded as new borrowing.

Did you declare your £2k overdraft on your application and did you intend to pay it off?

StuddedPunk

Hi MattMattMattUK. Thanks for your response.

Yeah we have handed over all our statements for multiple banks and shown the source of the deposit. From sale of assets, to the savings to my bank banks account. 

As far as I am aware we have declared everything to the lender, we went through a broker who has been very helpful and me and my partner have been 100% truthful with him. We have sent over multiple statements and declared everything we can through our broker. I am just more frustrated that by placing it in my main account I may have jeopordised the whole thing. Like I say we did have the full 10k in our savings and I should have just kept it in there.  I understand this may now be a problem which is why I am reaching out but surely the lender would be away that if I had a 2k overdraft (which they know I have had for a long time), that when it would be placed into the account that the 10k deposit in there that would offset that overdraft?

MattMattMattUK

StuddedPunk said:

but surely the lender would be away that if I had a 2k overdraft (which they know I have had for a long time), that when it would be placed into the account that the 10k deposit in there that would offset that overdraft?

The lender would have been aware you had a £2k overdraft, they lender would have also have been aware that you had £10k savings, it does not necessary follow that the money would need to transit from the savings account, via the account with the £2k overdraft, to get to the solicitors bank account.

Your solicitor and broker will probably be able to guide you best as they will know your individual lender's rules, as well as their reporting obligations and if it will be treated by the lender as new borrowing or not. 

My gut feeling is that whilst this might cause some issues, I doubt it would be terminal as your non-mortgage liabilities were declared at £2k would would still be £2k after transferring the deposit to the solicitor, it might however involve jumping through some more hoops. Also I would take any delay as an opportunity to save a bit more/pay down more of your debt, even an extra month knocking a bit more off the overdraft might improve the situation. 

ACG

When did you move the money from the savings account to the bank account? 
If recently, it might be worth just getting the latest statement from the savings account as you presumably wont have a new bank statements yet anyway? 

If it was a month or 2 back then I am not sure. You are probably going to need to speak to the solicitor and see what they say. 

Soot2006

ACG said:

When did you move the money from the savings account to the bank account? 
If recently, it might be worth just getting the latest statement from the savings account as you presumably wont have a new bank statements yet anyway? 

If it was a month or 2 back then I am not sure. You are probably going to need to speak to the solicitor and see what they say. 

^ this

I am not a mortgage advisor, but I was very surprised that lenders don't necessarily need the most up to date bank statements.  Are you sure your lender even wants another statement, since you say you've already provided everything?

Sometimes there are many months between showing the statements and other documents for the mortgage applications  and the "final stretch" as you call it where everything needs to be sent on. You declared £2k debt at application. You were accepted. You have pooled your money into a single account and from there will transfer £10k to your solicitor. Why would the lender have details of the account in the interim, unless I'm missing something?  If they did another check, they'd find out that you still have £2k debt, as declared.

emma_829

Soot2006 said:

ACG said:

When did you move the money from the savings account to the bank account? 
If recently, it might be worth just getting the latest statement from the savings account as you presumably wont have a new bank statements yet anyway? 

If it was a month or 2 back then I am not sure. You are probably going to need to speak to the solicitor and see what they say. 

^ this

I am not a mortgage advisor, but I was very surprised that lenders don't necessarily need the most up to date bank statements.  Are you sure your lender even wants another statement, since you say you've already provided everything?

Sometimes there are many months between showing the statements and other documents for the mortgage applications  and the "final stretch" as you call it where everything needs to be sent on. You declared £2k debt at application. You were accepted. You have pooled your money into a single account and from there will transfer £10k to your solicitor. Why would the lender have details of the account in the interim, unless I'm missing something?  If they did another check, they'd find out that you still have £2k debt, as declared.

It’s not so much the lender doing the additional checks, but rather the solicitor doing this as part of the Money Laundering/Source of Funds checks. You usually need to provide the last 3-6 months bank statements and the solicitors check if any money has moved around and request further statements. If, during these checks, they find that the money has been transferred to the current account then they will ask for the current account statement. If they then realise there isn’t enough money in there if the overdraft is used, they will flag this with the client and then report it to the lender regardless as they’re under a duty to. Hence, the bank finds out from the solicitor. 

Dependent on the solicitor they may not accept the funds if they’re then sent from an account they don’t have a statement for, so need to make sure you provide the right statements.