Proof of funds check

curtis122

There are a few threads on 'Proof of funds' on here recently and reading them has made me think about when we buy a property. 

Our house is sold and we will be moving into rental, then we will start properly looking for our next home. We are mortgage free and the money will be in the bank ready once we find one. 

The house we will be looking to buy could be up to 200k more than we have sold our house for. Myself and my husband are very good savers and due to both being on fairly decent salaries, over the last 7/8 years roughly have saved over 250k.

This has been made up of having many regular savers each with different banks over the years and once they matured they got shifted into saving accounts, We knew we wanted to move eventually so this was our long term plan so any money we had left over each month we also put into savings.

Having to prove how we got the money would be painful as nearly all of the money from the regular savers gets paid out to another bank first before moving to the saving account.

Do they only tend to ask you to go further into 'proving' if there are any 'large' deposits showing?

user1977

That doesn’t painful, just means you might need to show more statements to track the funds being moved around. Often they’re only going to look back a few months anyway, the stories here about solicitors going back years are probably outliers.

UnsureAboutthis

user1977 said:

That doesn’t painful, just means you might need to show more statements to track the funds being moved around. Often they’re only going to look back a few months anyway, the stories here about solicitors going back years are probably outliers.

"proof of funds" to an EA is just that, EG, you show them statements of how much you have in banks/savings,NS&I etc.

A lender may need what you posted. As many parents have done in the last 15 years or so, we give cash gifts to our children. If the gifts are more than a few quid, you sign a declaration stating the money is a gift, i.e., your child's money, and no longer yours. This then allows a lender to lend an appropriate amount/etc

poseidon1

 Forewarned is forearmed.

Its useful for all would be purchasers of property to understand the depth of MIL enquiries Solicitors regulation authorities now expect of them. See example below.


https://www.lawscot.org.uk/news-and-events/blogs-opinions/source-of-funds-and-source-of-wealth-what-you-need-to-know/#:~:text=The question you are seeking,or evidence should be sought.

Professionally it was my past experience that with regard to MIL, Solicitors were traditionally  much slacker than their Chartered Accountancy counterparts, where the ultimate penalty for gross MIL failures was prison.

 Solicitors' regulators have had to impose more pressure on their members to do better. For some solicitors and to mitigate the impact on the cost of their professional Indemnity cover this has resulted in the perception that some have gone overboard in complying with a regime designed to root out criminal money laundering.

Understandably, to the ordinary (innocent) punter embarking on their one off property transaction, this may all seem overkill, but given that the  London property market ( in particular) had been the  traditional haven for money laundering on an industrial scale facilitated by careless ( or worse ) solicitors,  there is good reason for the present show of vigilance.

Hoenir

With a sum as large as £250k. Be prepared to provide as much evidence as you can. 

grumpy_codger

Hoenir said:

With a sum as large as £250k. Be prepared to provide as much evidence as you can. 

And what if as much as they can isn't much enough?

With a lump sum £295K my solicitor was happy with 3 months worth of statements. But I chase rates and have more than a dozen regular savings accounts. That's why my first question when visiting a solicitor first time was how deep to the past they normally go. A year ago I had very bad experience with a solicitor wanting 2 years.

However, this time we took a small mortgage and I, think, this makes a big difference compared to buying for 100% cash.

artyboy

Honestly it's a lottery from one conveyancing firm to another, and the reason for this is that 'source of funds' checks (as distinct from the much simpler 'proof of funds') are based on regulatory guidance rather than line by line prescriptive checkbox rules. 

There are good reasons for this, because there are situations where judgement is needed in terms of anti-money laundering checks. But on the flip side, some solicitors take an exceptionally risk averse view and want an audit trail of money going back many years (I think we saw a thread recently that wanted 20 years of bank statements).

I'm going through this right now, and because I've got a reasonably good understanding of the rules (in a professional capacity), I was able to head it off by basically showing them 7 years of a lot of salary and bonus money coming into my main account. Which was much easier to do than try and come up with an audit trail of the specific funds that I'd be using for the purchase. 

Technically that counts as 'source of wealth' rather than 'source of funds' but it did the trick - the point is it allayed concerns that I didn't have enough legitimate money built up to pay for the property.

Fingers crossed it goes well for you too!

curtis122

I have another question on this topic also,  We have 3 savings accounts, 2 of which will be funding the house purchase.

The 3rd savings account is a 'general' savings account which we pay into regularly and have had several large deposits go into it in the form of dividends over the last 18 months, this account funds other stuff like our ISA when the new Isa year comes around.

When we have to provide payslips they will see these few large deposits leaving our current account going into the 3rd account, given its not going into the account funding the house I'm assuming they won't need any 'proof' of where it came from? I'm assuming they will only want proof of how we built up the money sat in the accounts we are buying the house with?

I'm slowly trying to get some paperwork together now to try and make things easier when the time comes.  

Bigphil1474

The solicitors are checking that you aren't money laundering. If you can show paperwork that proves you aren't money laundering, then they should be satisfied. If the paperwork shows money bouncing around all over the place, then they'll need to be able to track all those bounces for the money that is being used for the purchase. If there is completely separate money somewhere that has no contact with the purchase money at all, then best leave it out completely - if there's some contact, then you'll need paperwork.

We bought our house with about 50% sale of property, 10% mortgage, and the rest was from inheritances, about £50k each - mine was from a parent, my OH's was from an auntie. My OH had just put the money straight into a savings account and left it there making a modest income for a few years. They provided statements for about 2 years and all fine. Mine had been bouncing between different savings accounts offering enhanced rates, had been split up and brought back together etc. and I'd had the money about 18 months. I had to provide a mountain of paperwork to show where it had all been, including a copy of the statement from whence it came from the executor originally. If your paperwork doesn't prove to you where the money came from, a solicitor won't be happy.

theartfullodger

Amazingly different solicitors have different processes.  Apologies for the surprise.