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:
When applying for a mortgage to purchase a home providing proof of your deposit source is a key part of the process. This step is mandatory for all mortgage applicants in the UK, but many first-time buyers are unsure exactly why it’s required and what documents they need to supply.
In this article, we’ll explain why lenders require you to prove your deposit source, the different ways deposits can be funded, what documents you’ll need to provide, and tips for making this step as smooth as possible when applying for a mortgage.
Why Do Lenders Require Proof of Your Deposit Source?
There are two main reasons why mortgage lenders require you to prove where your deposit funds have come from
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To verify you have sufficient funds – The lender needs to see evidence that you have the full deposit amount required in your bank account(s) ready to put down This ensures you can complete on the property purchase.
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To check the deposit origin is legitimate – Strict anti-money laundering regulations require lenders to establish that all funds used in a property purchase, including the deposit, come from legal sources. This prevents mortgage fraud.
Essentially, the lender needs full confidence that you have the deposit money ready and that it has not come from any illegal activity. Failing to provide adequate proof of your deposit source will result in your mortgage application being declined.
What Are the Acceptable Sources of a House Deposit?
There are several sources of funds that most lenders will happily accept when providing a deposit:
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Personal savings – Money you have gradually built up over time and can show evidence of accumulating through bank statements.
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Equity from another property – Funds raised by selling a property or remortgaging to release equity.
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Inheritance – Money received as a beneficiary of a will. You’ll need to provide documentation from the executors.
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Sale of assets – Selling cars, jewelry, art, collectibles etc. You’ll need to provide receipts/paperwork detailing the sales.
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Gifts – Money gifted by immediate family members like parents if you provide a signed legal gift agreement.
Other less conventional sources may also be accepted but usually with stricter conditions, like gifts from distant relatives, gambling winnings, help from an employer etc. Discuss these with a broker first.
What Documents Do You Need to Provide to Prove Your Deposit?
The documents required depend on where the deposit is coming from:
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Savings – Bank statements showing regular payments in over several years.
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Property sale – Completion statement and evidence of funds in your account.
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Gifted deposit – Signed gift letter with amount and source. Giftor’s bank statements.
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Inheritance – Certificate of deposit from executors and evidence of funds.
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Sale of assets – Receipts/paperwork documenting sales and funds in account.
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Equity release – Equity release paperwork and mortgage/valuation statements.
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Overseas funds – Statements tracing source over time. Extra anti-fraud checks.
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Gambling/lottery/bonus – Receipts and evidence of funds entering your account.
Always speak to a broker to confirm exactly what’s needed for your circumstances. Failing to provide adequate paperwork will delay or block your application.
Tips for Proving Your Deposit Source Smoothly
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Disclose your deposit source accurately right from the start so there are no surprises later.
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Gather all necessary documents before applying so you can provide them promptly when needed.
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If requested paperwork seems excessive, ask why it’s needed so you understand.
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Keep paper trails for any large deposits into your account in the last few years.
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With gifted deposits, ensure the giftor provides proof of their source of funds too.
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If deposit is from an unconventional source, speak to a broker first about your options.
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Don’t put down cash deposits without speaking to a broker first, as banks distrust cash.
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Be patient if you’re asked for extra paperwork. It’s for legal compliance, not to inconvenience you.
Providing proof of your deposit source is a legal requirement of the mortgage application process. While it may seem tedious, it protects all parties against potential fraud and money laundering. Being aware of the documentation needed for your particular circumstances helps the process go smoothly. Discussing your situation with a qualified mortgage broker also ensures your evidence is satisfactory and prevents unnecessary delays.
Will a ‘transaction list’ be ok instead?
Not normally, no – in general they don’t contain the key information about your account above.
Download the Summary Table
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.
THIS IS HOW TO PROVE YOUR MORTGAGE DEPOSIT | RAZZIELLE
FAQ
Do I have to prove where my down payment came from?
Do lenders need to see proof of deposit?
The source of these funds is verified through a bank statement. You will usually be required to prove where your deposit has come from when purchasing a home with a mortgage. This is because banks will want to make sure that you have the funds to make full monthly mortgage repayments.
Do you have to prove where earnest money comes from?
Your bank statement showing the funds leaving your account. If your EMD was paid by someone else who is not part of the transaction, this will be considered a gift and you will also need to provide a gift letter (see Gift Funds for more info).
Do you have to prove where money comes from?
It’s not enough to prove that you have the money to buy property, you have to prove where that money has come from and that it is not the proceeds of crime.