When you buy a house, you need to provide proof of funds. This is typically sent to your solicitor.
They can then pass it on to the estate agent or the seller’s solicitor.
You can show proof of funds in several ways. And the method you choose impacts how you do this.
In this blog, we’ve explained all the different ways you can show proof of funds.
1. Mortgage agreement
If a bank or building society agrees to lend you money, they will send you a written mortgage agreement.
This will confirm your mortgage amount. This figure, combined with your deposit, should add to the sum of the house you’re buying.
You’ll need to provide a copy of the mortgage agreement, along with a bank statement showing the funds in your account.
Mortgage in principle
Another way to do this is using a mortgage in principle. This is a written statement from a lender confirming the amount they’re willing to lend you.
(Of course, it relies on all the details you’ve provided being correct.)
You can combine this with your deposit size to give proof of funds. Once again, you’ll need to hand over a copy of these documents.
2. Bank statement
You should have a bank statement showing your account’s full sum of money.
This applies for both cash buyers, and those using a mortgage. It’ll give evidence of the deposit you’re making.
Combining this number with your mortgage should cover the total of the property you’re buying.
3. Proof of property sale
When you exchange contracts to sell a property, it confirms the amount of money you’ll receive from the sale.
If you have a copy of this contract, it will show the amount you received.
Keep in mind that you’ll then also need receipt of you paying off any outstanding mortgage.
This is the amount needed to calculate how much you’ve actually got access to.
4. Deed of gift
If someone wants to gift you money, they need to create a deed of gift.
This document proves how much money you received and confirms that it doesn’t need to be paid back.
Ensure this deed also details the person giving you the money because it will be needed to confirm the source of funds.
You’ll then need a bank statement to demonstrate that the gift has arrived.
5. Confirmation of an inheritance
Inheriting money is another common example of how you could have access to a large deposit.
You’ll need to show a letter from the executors of the Will, confirming how much you’re entitled to receive.
Inheritance tax will then need to be factored in, so you can verify how much money you can access.
If you’ve got a copy of the Will itself (i.e., because you’re an executor), this can work too.
Pair this with a bank statement showing the money in your account.
6. Dividend certificate
Every year, companies all over the UK release ‘dividends’ to their shareholders.
The business has made this distribution of profits over the year. When this happens, you’ll receive a certificate to confirm the amount that you’ve received.
Remember that tax is due on dividends you’ve received over a certain threshold.
This impacts the amount of money you have access to. You’ll need to factor this into your proof.
A bank statement can show this dividend in your account.
7. Release of funds from a pension
You can release funds from your pension once you hit a particular stage in life and thus have access to this money.
If you show a copy of your pension release document and a bank statement showing the money being received, this can act as proof of funds.
8. Receipts for large sums of money
There are plenty of other ways to receive a considerable sum of money.
If this applies, you’ll need to show proof of your receipt of this, along with the money appearing in your bank statement. Examples include:
- Gambling
- Selling shares
- Winning the lottery.
A solicitor will sometimes ask for confirmation from the facilitating company, such as the lottery organisation, or the casino.
9. Company accounts
If you run your own business, and/or are buying the house through a company, then company accounts can demonstrate how much profit you’ve made in a year.
It can also show the cash in bank that your organisation has access to. This is sufficient proof of funds when the company buys the house.
If you’re transferring money from your company into your name, you must give evidence of this transaction.
A dividend certificate is one example. Or a salary payment appearing on your bank statement is another.
