Let’s face it, very few of us are comfortable talking about money let alone having our finances scrutinised by someone else. Yet it is an essential part of buying a property and one of the most important questions a conveyancer will ask is ‘where is your money coming from?’.
Richard Wisnia, director and head of the new build conveyancing department at Switalskis Solicitors, says buyers need to leave their guardedness at the door when talking to conveyancers about the source of their deposit and should be prepared to provide documents to prove it. Without full participation in this part of the buying process, delays could occur or, ultimately, the conveyancer may find themselves unable to represent the buyer. Richard explains:
“Conveyancers are placed at the heart of the information gathering process when it comes to how homebuyers fund their purchase. More so than any other stakeholder in the process. We understand that this can feel intrusive for homebuyers who wouldn’t normally have to answer questions on their financial affairs to this extent in other areas of everyday life. But lawyers are obliged to establish both the current location of the money (where it is now) and the source of that wealth (where it has come from).”
Here’s how homebuyers can help the process run smoothly:
1) Be clear from the beginning
Giving full information when asked at the beginning is key. A great example is when homebuyers receive cash gifts from parents to help with deposits, and already have the money in their account. There is some logic in saying that the funds already belong to the homebuyer, but for conveyancing purposes the true source of the funding is a gift from a third party. This involves additional work and usually some small additional legal costs. A failure to properly disclose the correct source of money at the outset will slow the transaction because the additional work will still be carried out, only later in the process, and any additional charges will still be payable.
The four main sources of funding we come across are:-
Secured Loans – e.g. mortgages or the Help to Buy Scheme
Equity – money you are releasing (or have already released) from the sale or refinancing of an existing home
Savings – most commonly this is money you have saved over time from your earnings
Third Parties – family gifts or loans, or inheritance.
2) Provide evidence
It will save time and prevent delays to prepare your supporting financial document in advance. Here are some helpful examples, based on frequent instances where we have to ask for further information:
- “Savings” should be evidenced with 3-6 months-worth of account transactions to show you have saved over time. If you have moved large sums into that account, you will need to provide documents for the original source account.
- If you have sold a property and the proceeds of that sale will fund your purchase, you must provide a completion statement and a bank statement showing the funds being paid to you.
- If you are taking dividends from a company you have a controlling interest in, your company accountant will need to provide confirmation of this.
3) Prepare others
Our processes apply not only to the purchasers themselves, but also to anyone else who is putting money into the deposit, including buyers’ relatives. I would recommend buyers to let these “donors” know in advance that they will be asked to follow the conveyancers’ requirements. Again, this may seem intrusive, especially where they themselves have purchased a property at a different time in the past and were not necessarily asked for this level of information.
By taking this approach in all cases, and without exception, we give peace of mind to all of our clients that they are being looked after by a firm which takes its responsibilities, and the risks of money-laundering and fraud, incredibly seriously.