Source of Deposit Queries

Lexale

Hi all, 

I've been saving for a deposit on a house since about 2018, and by 2024 I hope to be in a position to buy, dependent on my health and employment status. I worked full time from 2018-2019, but suffered a major foot injury at work which left me unable to walk at all for about 3 months, and I received physio for this at the time, it's still nowhere near fully recovered even 3 years later. Partly because of this, and losing my job as a consequence, I also developed severe mental health problems, needing regular therapy. I couldn't work or leave the house (I suffer agoraphobia). My foot will (doctors projection) never get back to the way it used to be, and I'm still receiving regular mental health treatment. Consequently, I ended up applying for PIP (Personal Independence Payment) in 2020. My claim was successful and I received an award lasting until 2023, which I expect to be renewed due to my circumstances. I'm currently doing a degree remotely, and receive a combination of grant/loan for this, plus I do some self employment work (transcription) which brings in minimal income online, I file a tax return every year as it's over £1k/yr but not much more than that. All in, my income annually is about £13k or so but I'm able to save most of this due to low living expenses (at home paying a small rent, helps enormously) and spending basically nothing on myself or leisure, my hobbies are very cheap / free. If I was in a position to get a mortgage, it would either be from remote working with a contract once I've graduated, or hoping my therapy works and I can finally get out the house sustainably again and secure more traditional employment. 

I'm hoping to buy with a partner, and I have a few questions about source of deposit: 

Firstly, when you're buying together is it necessary to show your partner all the documents (such as bank statements etc.) or would my partner have access to these through the mortgage lender/solicitor as it would be a joint mortgage? I'd honestly rather they didn't know I receive PIP just due to the stigma of it, and it's a topic I find very hard to discuss. I may tell them at some point, but I'd rather it not come out or have my hand forced sat round the table with a mortgage broker.

Secondly, are (non means tested) benefits considered okay by a lender as a partial source of deposit? PIP amounts to around 40% of my income at present, which obviously can change over time.

Finally, how far back do most lenders tend to go when requesting source of deposit? Our combined deposit would be in the ballpark of £70k, which is the combination of both of us saving since 2018 with myself having a slightly larger share of that. It's obviously a decent amount of money, so I'm just wondering how that affects things. 

Thanks kindly in advance for any help you can give, I looked around online and couldn't find much regarding this. 

Cheers  

Lexale

Ah yes just to add, how do student loan/grant payments that have been saved go down as house deposits? Again, couldn't find much on this but seeing as that's around half my income at present, it's a significant source of my deposit funds. Thanks again  

custardly

RE first point, your partner will have zero visibility of the bank statements you submit l for your affordability aspect.

Re second point, sorry no idea.

Third point, it is solicitor/broker dependant. They need to be satisfied that there is nothing dodgy going on with the money. Our savings (of similar size to yours) were in an ISA that we had accrued over many years. Solicitor and broker only wanted the most recent annual statement. This was early 2020 so quite recent.

emmajones1976

Fourth point: is a wise to create a financial link with someone if you are wary of telling that person your income arrangements? Or have you mistyped that and do you mean you dont want to tell the broker you are on PIP?

MaryNB

Regarding your third query there's not really a hard and fast rule about how far they go back. I showed my solicitor about a year's worth of monthly statements showing income coming into my current account and then being transferred into savings. I also included the last 3 annual statements for my savings account showing the balance increasing.

What helps is a narrative describing how you accumulated the funds. I explained been working for 7 years and what my salary was so the solicitor was satisfied it was reasonable for me to have those savings. With an income of £13k since 2019 and savings over 3-4 years of £35k+ you might be subject to a bit more scrutiny. 

My dad gifted me money that he had in a savings account for years but he still had to get a letter from his former employer stating it was lump sum retirement payout from 7 years ago. The bank statements going back 5 years weren't good enough. It depends on people's circumstances and how confident the solicitor is on signing it off. 

At the start of the process ask your solicitor exactly what they require and in what format. I found it quite a tedious process.

Lexale

custardly said:

RE first point, your partner will have zero visibility of the bank statements you submit l for your affordability aspect.

Re second point, sorry no idea.

Third point, it is solicitor/broker dependant. They need to be satisfied that there is nothing dodgy going on with the money. Our savings (of similar size to yours) were in an ISA that we had accrued over many years. Solicitor and broker only wanted the most recent annual statement. This was early 2020 so quite recent.

Hi custardly

Thank you for clearing up that first point, I'm assuming that includes source of deposit documentation too? 

No worries at all!

Thank you kindly for that! Nothing at all, I've got quite a few current accounts due to switching for bonuses (helped by MSE) and getting the best interest deals over the years, I think I had 5 at one point plus several regular savers, so might be a bit of a paper trail there. Still, I'll be stopping that from 2023 onwards to remove the hard searches on my credit score. Thank you for your contribution  

Lexale

emmajones1976 said:

Fourth point: is a wise to create a financial link with someone if you are wary of telling that person your income arrangements? Or have you mistyped that and do you mean you dont want to tell the broker you are on PIP?

Hi Emma

I know it sounds unorthodox, but honestly yes. PIP has quite a stigma around it, and she knows I have quite a lot of cash of course. I'm just not comfortable telling her, I've never told anyone outside close family who I live with and help me with stuff I can't manage. As for the broker, I'm not really concerned to be honest, if I was going through with it I'd have sufficient income from elsewhere after I graduate, wouldn't need to include PIP to get to the amount I'm borrowing and I'm hoping that one day if I continue to get treatment I'll be able to come off it. I'm hoping any discussions with the broker would be private anyway, despite the fact we're getting a mortgage together I'd like to think they'd respect my wishes for not disclosing that.

Thanks for your help  

Lexale

MaryNB said:

Regarding your third query there's not really a hard and fast rule about how far they go back. I showed my solicitor about a year's worth of monthly statements showing income coming into my current account and then being transferred into savings. I also included the last 3 annual statements for my savings account showing the balance increasing.

What helps is a narrative describing how you accumulated the funds. I explained been working for 7 years and what my salary was so the solicitor was satisfied it was reasonable for me to have those savings. With an income of £13k since 2019 and savings over 3-4 years of £35k+ you might be subject to a bit more scrutiny. 

My dad gifted me money that he had in a savings account for years but he still had to get a letter from his former employer stating it was lump sum retirement payout from 7 years ago. The bank statements going back 5 years weren't good enough. It depends on people's circumstances and how confident the solicitor is on signing it off. 

At the start of the process ask your solicitor exactly what they require and in what format. I found it quite a tedious process.

Hi Mary

Thank you for that, I think mine may be a bit longer than that purely due to the unorthodox nature of how I've accumulated it, it would've been 6 years by 2024 if I was buying there, having started in 2018 with close to zero. 

I understand that, as I say I spend nothing at all on myself, and have very few outgoings so I've been saving over 80% of my income for 3-4 years already, and will do so for the next 2 years while I finish my degree. It's always been my goal to buy a house so I've put everything else aside to give it my best shot. 

It certainly does sound tedious! I shall do, would it be best to contact a solicitor now just to ask for guidelines on this stuff? Would that cost anything just for some basic advice do you think? I'd rather not spend if I have to but if it's necessary to get an idea it's decent value, considering I'm paying money into a LISA every year that I'm not even sure I'll be able to use towards a house. 

Thanks kindly

MaryNB

Lexale said:

MaryNB said:

Regarding your third query there's not really a hard and fast rule about how far they go back. I showed my solicitor about a year's worth of monthly statements showing income coming into my current account and then being transferred into savings. I also included the last 3 annual statements for my savings account showing the balance increasing.

What helps is a narrative describing how you accumulated the funds. I explained been working for 7 years and what my salary was so the solicitor was satisfied it was reasonable for me to have those savings. With an income of £13k since 2019 and savings over 3-4 years of £35k+ you might be subject to a bit more scrutiny. 

My dad gifted me money that he had in a savings account for years but he still had to get a letter from his former employer stating it was lump sum retirement payout from 7 years ago. The bank statements going back 5 years weren't good enough. It depends on people's circumstances and how confident the solicitor is on signing it off. 

At the start of the process ask your solicitor exactly what they require and in what format. I found it quite a tedious process.

Hi Mary

Thank you for that, I think mine may be a bit longer than that purely due to the unorthodox nature of how I've accumulated it, it would've been 6 years by 2024 if I was buying there, having started in 2018 with close to zero. 

I understand that, as I say I spend nothing at all on myself, and have very few outgoings so I've been saving over 80% of my income for 3-4 years already, and will do so for the next 2 years while I finish my degree. It's always been my goal to buy a house so I've put everything else aside to give it my best shot. 

It certainly does sound tedious! I shall do, would it be best to contact a solicitor now just to ask for guidelines on this stuff? Would that cost anything just for some basic advice do you think? I'd rather not spend if I have to but if it's necessary to get an idea it's decent value, considering I'm paying money into a LISA every year that I'm not even sure I'll be able to use towards a house. 

Thanks kindly

Ah ok, I misread the £70k comment.

I wouldn't bother asking now. As soon as you have instructed your solicitor during the buying process explain your situation and ask what they require. Mine was quite vague - I'd send something, hear nothing for a week or two and then she'd ask for something more, rinse and repeat. Sometimes pdf copies by email were required, sometimes she wanted a hardcopy. 

If your savings are consistent and you can show that using statements you should be ok. Although even over 6 years that is a lot of money to save for a such low income so they might go back a bit further than the usual 6 months or so.