When arranging a mortgage to purchase property, providing a deposit is a crucial step. The deposit can come from various sources, and both your mortgage lender and solicitor will require proof of where it originated. Here is a detailed look at the different ways you can fund your deposit, and the documentation needed for each.
Personal Savings
Personal savings are the most common source for a mortgage deposit. To prove this, you will typically need to provide up to six months of bank statements. These statements should clearly show the money accumulating in your account over time.
Inheritance
If you receive a large lump sum through inheritance, this can be used towards your mortgage deposit. Most lenders accept inheritance as a valid source, but you will need to provide documentation detailing the amount received and bank statements showing the money entering your account.
Gift
Many buyers receive help from family members in the form of a gifted deposit. Most lenders accept gifted deposits from close family members, provided you supply a written legal agreement. This agreement must state that the money is a gift, with no expectation of repayment or claim to ownership of the property. A mortgage adviser or solicitor can assist in drafting this letter. Some lenders may also accept gifted deposits from more distant relatives or family friends. You will also have to provide an audit trail of the money being gifted.
Sale of a Property
If you are moving from one property to another, you can use the proceeds from the sale of your current property as your deposit. This is a straightforward and commonly accepted method.
Unacceptable Deposits
It is important to note that taking out a loan to cover your deposit is generally not acceptable. Lenders require the deposit to come from your own funds or acceptable sources like those mentioned above, not from additional credit.
Conclusion
Understanding the acceptable sources for your mortgage deposit and the required documentation can streamline the mortgage process and increase your chances of approval. Whether your deposit comes from personal savings, inheritance, a gift, or the sale of a property, being prepared with the necessary proof will help ensure a smooth transaction. The FCA does not regulate solicitors and some forms of Inheritance planning, we act as introducers for solicitors & Inheritance planning.
If you have any questions or need further assistance, feel free to reach out to a mortgage adviser or solicitor. They can provide personalised guidance based on your specific situation.