Subbie Tip #10 – Evidencing Your Mortgage Deposit

Your mortgage deposit is naturally important, but it’s also important that you can evidence where it came from!

This is important for everyone planning to get a mortgage, particularly CIS subcontractors.  I have seen many examples where lack of an accountable trail for deposit funds have tripped people up.  In some cases, this is because many of my clients are non-UK nationals with deposits coming from abroad but the rules about deposit funds apply to all mortgage seekers I work with.

As a mortgage advisor, whilst I have a duty of care to my clients to provide good advice, Anti-Money Laundering (AML) checks are one of the main focus areas for the Financial Conduct Authority (FCA) so it’s equally important that I can satisfy the lending banks and building societies that I access on your behalf, that you can fully explain and evidence where your deposit funds have come from.

To add to the frustration, solicitors often leave doing their own AML checks until the final stage of their part in the process so if your mortgage advisor hasn’t done their own due diligence then even with an offer in place and all parties ready to exchange contracts, there can be last minute problems.  I’ve heard many accounts from solicitors and fellow mortgage advisors where sales have fallen apart at the last moment because this has happened.

What does all this mean for you?

If your deposit is all from savings then you need to be able to evidence this.  Don’t be surprised that if you’re a labourer earning £100 a day with a £100,000 deposit, your mortgage lender and broker (if you’re using one) may question the plausibility of this.  It could well be that you have been living rent free with family for 15 years whilst saving nearly everything you’ve earned, but you need to be prepared to be able to evidence this and be able to answer questions about it.

Similarly, if a family member is gifting you the deposit or an amount towards it then that person will need to have their own ID verified and be able to produce bank statements to show that money in their own account and subsequently leaving it and arriving in yours. 

Whilst it should be relatively simple to provide appropriate evidence for the above scenarios, there are others which often prove more challenging.   The two that I come across most regularly and which often pose the biggest problems are cash deposits and those arising from the sale of an asset (often a car, property or land overseas).  In all cases, mortgage lends will take a stance that unless you can evidence where all the money has come from, there is a risk that it may have been derived from the proceeds of crime.

So, what can you do to overcome this?  There are some simple steps you can take to ensure you have the necessary paper trail.  For ‘example; if you sell a car privately, try not to deal in cash.  Instead, ask for a bank transfer from your buyer and produce a ‘sales invoice’ that they can sign including contact details enabling the information to be verified.  Also include a copy of the log book record you retain after the sale; the more paperwork you have the better!

Similarly, if you sell a property or, perhaps some land, here or abroad avoid cash transactions – even if you pay the cash straight into a bank account (whether in the UK or abroad), you will need to make sure you can produce legal documentation to back up the amount received.  If the transaction did take place abroad, aim to get the documentation translated into English ready for your mortgage lender and solicitor.  It is far better to be able to provide all the necessary information about your deposit upfront rather than waiting for the lender or solicitor to raise concerns or ask for it.

To give you an example of the impact of not being able to provide clear evidence; I recently had a client that sold some family land in Moldova for cash but with little paperwork to evidence the sale.  The client drove across Europe (allegedly) and deposited a significant sum of cash into their bank account.  Sadly, with no firm evidence of where this money has come from, I am unable to obtain a mortgage for them until they’ve saved the deposit themselves from earnings in the UK.

So, whilst having a deposit ready to hand over is a good thing; it’s vital you can evidence the source of your funds.  I and my team of advisors are here to help and happy to chat through your individual circumstances to ensure that your deposit can pass the relevant criteria.  To get the ball rolling; call me today on 08000 306705 or drop me an email to:  david@cismortgage.co.uk

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE