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How are you funding your house purchase?

Napthens - May 31st 2017

It is becoming increasingly common for purchasers, especially first time buyers, to rely on family members and occasionally close friends, to provide financial assistance to enable them to take their first step in purchasing a property.

The financial contribution could be by way of a gift or a loan, or may be even both.  You might be lucky enough to have a number of contributions from different individuals, as well as contributing yourself.

Do I need to notify my lawyer and mortgage lender of the funding I receive?

Whether you are purchasing a property with the benefit of mortgage finance or not, your lawyer will need to have full details as to where the financial contributions originate from.

You may feel as though you are repeating certain information you have provided to your mortgage advisor, however your lawyer has a duty to understand the full details of the funding and also formally report the situation to your mortgage lender.

It is important to be clear with your mortgage advisor as to how the purchase is being funded, as mortgage lenders have different lending criteria.  If incorrect information is provided to your lender, you may find that the conveyancing process is slowed down later on down the line.  Also, a mortgage lender may decide not to proceed with the loan if the funding information revealed later on is different from the facts provided at the outset.

Both your lawyer and mortgage lender have to abide by strict anti–money laundering regulations and guidelines to ensure the purchase monies are from legal sources.  Your lawyer will normally act for both you and your mortgage lender in the purchase of the property and has a duty to act in both your best interests.  If at any point you do not wish for the funding information to be passed on to your lender, then your lawyer will be placed in a difficult position and will be unable to continue to act for you.

What are the consequences of not disclosing this information to my lawyer and mortgage lender?

By providing incorrect information about your income, debt obligation and full details of your funding you could be at risk of committing mortgage fraud.  Mortgage fraud is a criminal offence.

Be clear at the outset

Fully inform your mortgage advisor and lawyer as to how the purchase will be funded, as early as possible.  If your circumstances change or the financial contributions/private loans change at any point, please notify your lawyer immediately, so that they can fully update your mortgage lender and their own records.

What do I need to disclose to my lender?

Be ready to provide bank statements detailing where the monies are coming from.  Have your bank statements ready.  Usually between 3 to 6 months worth of statements will be requested.  If you have saved a deposit, then your lawyer will ask you what your salary is, how you have managed to accrue your savings and over what period of time.  This is to ensure they have a full picture as to where the monies have come from.  If you are receiving gifts, then your lawyer will need to obtain the identification documents of those individuals together with a bank statement showing where the monies have originated from.

Providing all of this information may seem time consuming, intrusive and detailed.  However, your lawyer does need to be fully informed and have a complete understanding of how the purchase will be funded.

If you do require full clarification, our lawyers will be only too happy to discuss your own circumstances in detail, either face to face or on the telephone to make this easier.