Where can my mortgage deposit come from?
“Where has your deposit come from?”. This question will and should always be asked by a mortgage advisor. This isn’t because they’re trying to be intrusive; it’s simply to start preparing your application. Advisors also have a duty to establish your deposit has come from a legitimate source. Every lender and solicitor will ask about your deposit source, so it’s important that mortgage brokers understand this from the outset.
Anti-money laundering regulation requires solicitors, lenders and advisors to ensure that mortgage deposits have not come from any illegal activity. It’s also important for lenders to assess your entire financial profile. Understanding how you’ve accumulated a mortgage deposit helps lenders to do this.
As all lenders vary in what they will and won’t accept, mortgage deposits are no different. Some lenders will accept gifted deposits with little fuss, whereas other lenders won’t. This is another reason why it’s vital for your mortgage advisor to understand your deposit source.
Knowing where your deposit has come from enables advisors to place your application with the right lender. It would be pointless in placing an application with a lender who simply doesn’t accept your deposit source.
Personal savings are the most common form of mortgage deposits in the UK. As deposits are saved in bank accounts, lenders can often calculate the increase in savings over a certain period of time. This helps lenders in assessing the legality of your income source. You will need to provide evidence of any income, such as bank statements, payslips or accounts if you’re self-employed.
Lenders will be satisfied if your mortgage deposit has come from your own personal savings. Even the strictest of lenders shouldn’t have any issues with that one, but on occasion, very strict lenders may probe further into your savings and how they’ve accumulated. This can involve requesting additional payslips, accounts or older bank statements.
Deposits from inheritance are typically accepted without any major issues. As long as there is a clear paper trail outlining that you’re the executor of the inheritance. Solicitor documents may also be requested from lenders to assess the inheritance in detail.
A gifted deposit is simply a deposit or part of a deposit that has been gifted to you. Gifted deposits are generally fine to use, however they do need to meet lender criteria. The majority of lenders will only accept gifts from documented family members. Even if your gift has come from step-family, it’s usually accepted.
If your gift has come from a friend or other source, then the majority of lenders won’t accept your mortgage application. That said, there are still a few lenders that may accept gifted deposits from non-family members.
Gifts from third parties are very hard to use as mortgage deposits. This is because of money laundering regulations and to minimise fraud. It isn’t impossible, but it is very difficult.
If you’re using a gifted mortgage deposit, then you will undergo comprehensive checks. Again, this is to minimise the risk of fraud and money laundering. On occasion, the individual gifting you the deposit may also undergo checks.
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