Proving Your Deposit: Everything You Need to Know

When we submit a mortgage application together, the most common thing that proves challenging is getting the right paperwork to prove your deposit. It’s more complex than you might think! Here, we explain why, and how to make the process as smooth as possible. Proving your deposit does 2 things:

• Shows you have enough money
• Explains where the money has come from

Why do I need to prove where my deposit has come from?

Unfortunately, buying a house is a common method (apparently!) of trying to evade tax or launder money. Because of this, lenders and regulators need to know not just that you have the money for a deposit, but where it’s come from. Sometimes, this is called proving the deposit ‘trail’. Proving the trail can be easy, or can potentially be quite tricky – depending on your circumstances.

With savings, you’ll generally, a year’s worth of statements, showing either that the money has just sat in the account, or that there has been a gradual build-up.

What if I don’t have printed statements?

Don’t worry! Most people don’t. And they aren’t expected. Download .pdf statements from your account – these should include your name, address, account number, statement date, and account balance.

Will a ‘transaction list’ be ok instead?

Not normally, no – in general they don’t contain the key information about your account above.

What if I don’t get regular statements from my savings account?

Don’t worry! Most people don’t. Provide the last 2 years’ worth of statements / annual summaries, and then a list of recent transactions.

What if I have some payments in my account I want to keep private?

Don’t worry! Many people do. You can ‘redact’ the name of a payee on a line-by-line basis, as long as it is for ‘small’ amounts (less than £500, as a rule of thumb). Make sure we can still see the amount, and balance though – remember, we are trying to show that there’s nothing illegal to do with the purchase – time is too short to look at every line in detail – we skim statements, looking for large transactions (or recurring payments) to make sure your deposit is legitimate and your monthly mortgage payments will be sustainable.

What if my savings are in stocks & shares or an ISA?

Don’t worry! Many people’s are. In this case, the principles are the same. You may still be able to produce a statement covering 12 months, or failing that, a most recent statement, and then a performance report. That performance report should have enough information so that we can tie it to the statement – usually that would be your name & the account number(s) in question.

With an investment, bear in mind that it’s value can potentially go down, so you will want to make sure that you withdraw your funds into a cash account in good time to cover your deposit.

What if my savings are in Crypto?

Don’t worry! The same principles apply as with savings accounts & ISAs, but we a few extra considerations.

First, because cryptocurrency has some history of being used for criminal transactions, then it is additionally important to be able to show where your payments into the account came from – you need to make sure you can prove that ‘money trail’.

Second, because crypto investments are particularly volatile, you will need to transfer the money to a cash account to prove you have sufficient funds before we put in the mortgage application.

What if I was given some money a while ago?

Don’t worry! If the funds have been in your account more than a year, they are considered your savings – the annual statement will show us.

If the funds have come to you more recently, then we will need to see that money trail – see the various scenarios below.

Using gifted money for your deposit

There are 2 things to consider here – is it really a gift, and where has the money come from?

Where has the money come from?

Evidence will be required in exactly the same way as if it was your own money – with the same proofs. This can be straightforward, but sometimes in can be awkward – if someone has been kind enough to give you some money, then asking them to also provide proof of where that money’s come from may seem a bit much. In practice though, almost everyone kind enough to give is happy enough to jump through the hoops required.

Is the money really a gift?

The person (or people) giving the gift need to sign a declaration (sometimes a letter, sometimes a specific lender’s form). The declaration usually needs to confirm that the money is being given freely, with no expectation of it being repaid, and that the person giving the money does not intend to benefit from / live in the property (although see gifts from spouses below). Once we have chosen a lender together, we will let you know exactly what format is required.

Can anyone give me a gift to buy a property?

Some lenders have a more generous view of humanity than others! They all believe that close family (parents, grandparents, children, siblings) will be kind enough to contribute to a deposit. Some will also extend that to wider family (aunts & uncles, cousins…), and a few don’t have any restrictions at all.

Can my partner give me money to buy a property?

In most cases, yes. If you’re purchasing a buy-to-let property, 2nd home or home for a dependent relative, this is straightforward. If the property is going to be your main residence, then it depends on the lender. If you are married or in a civil partnership, many will be quite happy with this no questions asked. Other lenders will want to understand the reason why first – as long as it makes sense, they will normally be ok with it (some will be cautious if one of you has a very poor credit history, for example). If you are not yet married or in a civil partnership, then options will be more limited – lenders think long term, and what could go wrong, so without that legal commitment to each other, they are cautious.

Can I use loans from family / friends for a deposit?

Most lenders are not happy with this as a method of getting a deposit… however there are 2 useful exceptions – first up, there are a couple of lenders who will consider this option, recognising the ways some families work. Secondly, it is possible to work with your solicitor to set up a legal document that defines how the proceeds would be divided if the property is sold – this is acceptable to almost all lenders, because it doesn’t put your ownership of the property (their security) at risk – it only kicks in if the property is sold.

If you are able to use a loan from family or friends, the source of the funds will need to be proved the same way as a gift.

Inheritance

When you receive an inheritance, there will be a will, plus settlement figures and statements produced by the executors of the estate detailing the amount of money you will be receiving. Copies of these, along with the statement showing the funds leaving the account of the deceased estate, plus the statement showing it arriving in your account will be needed.

Sale of property

If you are moving home, it is most likely that some of your deposit for your new place will be coming from the sale of a previous property. In many situations, you will not yet have this money – but you will still be able to prove you are going to get it! In this case, the memorandum of sale is the proof you need, combined with your most recent mortgage statement – together, they will give the evidence required to show the amount of equity you have in your home.

If you have already sold a property, then the completion statement from your solicitor, along with the statement showing the funds arriving in your account will do the trick.

A bonus, or other windfall

If you are fortunate enough to receive a lump sum from work, then the payslip that shows it being paid to you, along with the bank statement showing it arriving in your account will be sufficient evidence.

In the case of an insurance payout, or any other lump sum arriving, the same principle applies – the paperwork from the payee explaining why the money is coming to you, and when it will arrive, along with your bank statement showing the money hitting your account, will be all that is needed.

Sale of other assets

Whether it’s a car, caravan, jewellery, collectibles or even a Picasso, proving where your money has come from will be the same as for the windfall above – a receipt confirming the sale, along with the statement showing the money arriving in your account.

In some cases, if there has been a private sale, this may well be a little trickier, but in most cases, it should be possible to provide some kind of paperwork trail. In the case of a car for example, a copy V5C document which details the change of ownership would be a good substitute. If you are worried that you will struggle to prove where your money has come from, just give us a call, and we can discuss your particular circumstances and find a solution that works.