Proof of deposit or making mortgage overpayment

amsjrt

Hi, 
I have a odd question, not sure if this is a sensible thing to do:
Currently we have an existing mortgage with Nationwide with outstanding owed of about £250k, It is a tracker mortgage so there is no ERC if I make overpayment. We plan to move to a bigger house, so need additional money to be used as deposit to fund the purchase of new house. I am expecting about £70k overseas from my parents, so in theory this is considered a gift from parents, for the purpose of proof of deposit. However, is it possible that, instead of using this £70k as deposit for buying the new house, can I make overpayment of existing mortgage so this reduces the outstanding mortgage. This means when I sell it, there will be additional capital release from it to fund the purchase of new house.  Does it matter which way I do, i.e. either using this as deposit or make overpayment (hence saving some interest)?

Thanks

K_S

@amsjrt If you use the 70k as cash deposit for the onward purchase, the lender may require a gift letter and solicitor may need tracing documentation for anti money-laundering purposes. For cash from overseas, they could ask for things like your parents' bank statements going back x months, etc

If you use it to overpay the current mortgage, the bank (current account into which the funds are received, or Nationwide) may still ask for backing documentation evidence of source of funds but it's much less likely than in the above scenario.

amsjrt

K_S said:

@amsjrt If you use the 70k as cash deposit for the onward purchase, the lender may require a gift letter and solicitor may need tracing documentation for anti money-laundering purposes. For cash from overseas, they could ask for things like your parents' bank statements going back x months, etc

If you use it to overpay the current mortgage, the bank (current account into which the funds are received, or Nationwide) may still ask for backing documentation evidence of source of funds but it's much less likely than in the above scenario.

Thanks KS. Your comment on the tracing documentations etc is exactly the reason I am wondering why can't I put the money as overpayment into my existing mortgage. I have received large lump sum from overseas before in to my current account, but I don't recall the bank has been asking me any questions on it. Do you think Nationwide (i.e. the the lender for existing mortgage) will ask any questions of the source of the money for overpayment?
In my opinion, the advantage of making overpayment, instead of holding it as deposit to fund the purchase of new house are:
1) less hassle to fulfil the requirement of tracing documentations 
2) save some interest on the existing mortgage interest rates (as it's likely to be months before we will move to new house, as we are in a chain)

So I cannot see any downside of putting the £70k as overpayment, instead of holding it as deposit. Any views?

Thrugelmir

A large incoming payments, or indeed a series of transactions, may well trigger questions. Onus is the banks to monitor money laundering. Have the documentation to hand. Might as well pay down the mortgage and hold back sufficient funds to ensure you meet the deposit requirements on the next property.