Proving Mortgage Deposits: Tracking Transfers For Home Loan Approval

When applying for a mortgage, you will need to provide proof of the source of your deposit. This is to ensure that the money is legitimate and to keep financial dealings transparent. The type of proof you must provide depends on the source of the funds. For example, if you are using funds from a bank account, you will need to provide bank statements. If you are using funds from the sale of a property, you will need to provide documentation such as the sale agreement and bank statements showing the transfer of funds. If you are using funds from an inheritance, you will need to provide documentation such as a grant of probate or letters of administration, as well as bank statements showing the transfer of funds. It is important to note that lenders typically ask for bank statements covering the past 3-6 months to check your deposit source.

Proving the source of your deposit is essential for mortgage approval

Proving the source of your deposit is an essential part of the mortgage application process. While it is possible to get a deal in principle without proving where your deposit funds came from, this is a non-binding agreement and is not a mortgage guarantee. After this point, you will need to prove your deposit if you want a full mortgage offer.

Lenders and solicitors will conduct extensive investigations to validate your statements about the deposit's provenance. They will want to see that the money is from a legitimate, legal source and that you are financially stable. This is especially important if the deposit is a large sum of money that has suddenly appeared in your account.

The type of proof you must provide will depend on the source of the funds. The most common source is a personal savings account, and lenders will typically ask for bank statements covering the past 3-6 months to show the build-up of savings over time. Other common sources include the sale of a property, inheritance, equity from your home, or a gift from family. If your deposit comes from the sale of a property, you will need to provide documentation such as the sale agreement and bank statements showing the transfer of funds. For inheritance, you will need documentation such as a grant of probate or letters of administration, as well as bank statements. If you are using equity from an existing property, you will need to provide mortgage statements or valuations to confirm the amount of equity available. If the deposit is a gift, you will need a legal agreement confirming the money is a gift, that it will never need to be repaid, and that the donor has no rights over the property. The agreement should detail the value of the gift and be signed by all parties.

If you are using less conventional sources for your deposit, such as gambling winnings or cryptocurrency, you may need to provide additional documentation to prove the legitimacy of the funds.

Lenders prefer to see funds accumulate in your account over time

Lenders need to see proof of the source of your mortgage deposit money, and they will carry out rigorous checks to confirm that you have been truthful about its origins. This is because they are looking for borrowers who are likely to repay the loan, or, in other words, borrowers who have the lowest possible risk of defaulting.

If you are providing funds from an established bank account, it is far easier for solicitors to trace the origin of the cash and rule out any suspicions of fraudulent activity. The way you will need to evidence your mortgage deposit will depend on where it came from. For example, if you are using gambling winnings as a mortgage deposit, you will need to provide a receipt confirming your winnings and the amount, as well as a copy of your bank statement showing the incoming payment from the gambling company. If you are using gifted deposits from a family member, you will need a legal agreement confirming that the money is a gift that will never need to be repaid and that the donor has no rights over the property.

It is worth noting that if you are dealing with the same lender, you may not need to provide evidence as they will already have full visibility of the situation.

Gifted deposits require a legal agreement confirming the money is a gift

When it comes to buying a house, saving up for a mortgage deposit can be the hardest part. Gifted deposits can help you afford the lump sum you need. However, mortgage lenders will ask for proof that the money is a gift and not a loan. This is because they need to ensure that the funds are from a legitimate, legal source and that the donor has no stake in the property.

Gifted deposits are usually given by generous relatives or friends. However, a gift from a friend is deemed less trustworthy than one from a distant family member, and very few lenders will approve. Lenders will need to check that the donor meets their rules, and many prefer gifted deposits to come from a close relative. The donor will also need to show personal documents, such as proof of address and bank statements, to follow anti-money laundering laws.

To prove that the deposit is a gift, the donor will need to write a 'gifted deposit letter' or 'gifted deposit declaration'. This letter confirms that the money is a gift and that the recipient does not need to repay the amount. It should also detail the value of the gift and be signed by all parties. The donor will need to provide their name, address, and relationship to the mortgage applicant, as well as the source of the funds and proof that they are financially solvent.

It is important to inform your adviser and lender early on about the gifted deposit, as they can help you find the right lender that accepts your gifted deposit. They will also be able to help you gather the necessary documents before submitting your application.

Lenders are wary of cash deposits due to the risk of fraud and money laundering

Lenders will require proof of the source of your mortgage deposit, and they will carry out rigorous checks to confirm that you have been truthful about its origins. This is because lenders are wary of cash deposits due to the risk of fraud and money laundering.

Lenders and solicitors must adhere to strict anti-money laundering regulations, and there must be sufficient evidence that mortgage deposits are funded by legitimate, legal sources. If your money comes from a non-approved source, lenders will likely decline your application.

Cash deposits can complicate the mortgage application process because they change the financial picture loan underwriters are evaluating. A sudden increase in your bank account can raise red flags for several reasons. Firstly, loan underwriters must verify your sources of income, and a large cash deposit might suggest that you have not reported all income streams. Secondly, a sudden increase in your bank account might cause them to wonder if you have received a new loan or line of credit.

Lenders are also wary of cash deposits because they are difficult to source reliably. If cash is added to your account, it could make all the funds in that account untrustworthy. It is best to avoid cash when it comes to funding your deposit.

The most difficult type of deposit to verify is "mattress money", i.e., cash that was never deposited in your bank account. Proving the source of this type of money is challenging, and it is best to wait until after your mortgage loan is approved to deposit these funds.

Cryptocurrency deposits require transaction history and a current balance

When applying for a mortgage, you must provide evidence of the origin of your deposit. Lenders and solicitors will conduct extensive investigations to validate your statements about its provenance. This is a vital stage of the mortgage application process, and strict anti-money laundering regulations must be adhered to.

If you are using cryptocurrency profits as a deposit, you cannot use the cryptocurrency itself. However, you can use the profits once they have been converted into sterling or 'fiat' currency. This can be a challenge, as the anonymous nature of cryptocurrencies means many lenders have yet to decide whether to accept them, and some will turn your application down immediately. A small number of lenders in the UK will consider your application, including Pepper Money, Loughborough Building Society, Generation Home, Norton Home Loans, Bluestone Mortgages, Barclays, Nationwide, and NatWest.

Lenders will want to know about the origins of your cryptocurrency investments, and you will need to provide a paper trail showing how you acquired and sold your holdings. This includes:

• Bank and investment account statements showing when the crypto was initially purchased
• Crypto balances throughout the ownership period
• The value of the crypto at the time of liquidation
• Proof that the funds derived from the liquidation were deposited in the checking account

To simplify the process, it is recommended that you deposit your cryptocurrency funds into a bank account for a minimum of 60 days before applying for a mortgage. This allows you to provide the necessary paper trail and ensure that your funds are not deemed untrustworthy by the lender.

Frequently asked questions