Solicitors will check the proof of funds at the start of the conveyancing process. This check ensures the buyer has the money to buy a property. This includes those buying with a mortgage.
Failure to pass the initial proof of funds can result in prolonged delays. If further evidence is not submitted, the transaction will fall through.
In this guide, we’ll take you through everything you should know about the proof of funds. This includes when your solicitor will check them and what proof is required.
What is Proof of Funds?
Proof of funds must be provided and verified as part of the anti-money laundering checks. Your solicitor will conduct these checks at the beginning of the conveyancing process. This will prove that the funds you are using are safe and legitimate. It’ll also confirm you can afford the property and how you can afford it.
Your solicitor can't legally go ahead with the process if you don't provide evidence of your funds. Therefore, it's advised to have this ready for once your offer is accepted.
Why Are The Checks Done?
As large amounts of money are being transferred daily within the property market, the conveyancing industry can be a target for money launderers. Therefore, anyone buying a property in the UK must comply with Money Laundering Regulations to ensure no property is bought with the proceeds of crime.
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Who Needs to See Proof of Funds?
Multiple parties will need to view your proof of funds throughout the conveyancing process. The proof is likely to be similar although the reason can vary. Even if you are a cash buyer, you should be prepared to share your proven funds with the relevant parties.
These include:
Conveyancing Solicitor/Conveyancer
Your conveyancing solicitor will review your proof of funds to confirm the money has a legitimate source. Your proof of funds will also need to be checked by the seller’s solicitor. They will then inform the seller that you can afford the purchase.
The Estate Agent
The estate agent needs confirmation and proof of funds at the beginning of the process. Estate agents act per the Property Ombudsman Code of Practice following their legal requirements.
Your Mortgage Provider
If you are buying with a mortgage, you’ll need to submit your proof of funds to your provider. This is so they can analyse whether you’ll be able to make payments over the mortgage term. Your mortgage provider will likely assess your funds when issuing a mortgage in principle. This confirms you can afford the full purchase price. Read our guide on what happens after a mortgage offer to learn about the next steps.
Why Do Solicitors Check Proof of Funds?
Your solicitor will review your proof of funds to ensure that the money is legitimate. This is to eliminate the possibility of money laundering due to the large amounts of money involved with property purchases.
All property transactions require these checks. If your solicitor fails to carry out the relevant fund checks, this is in breach of their due diligence. This can lead to criminal sanctions in line with the Proceeds of Crime Act 2002.
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What Documents Do I Need to Provide for Proof of Funds?
Before providing proof of funds, you'll first need to provide proof of identification, such as a passport or driving licence. You'll then need to provide proof of your current address, such as a bank statement or utility bill.
Providing proof of funds means the solicitor knows you have the money ready for completion day to pay the conveyancing fees, searches and taxes. You'll need to provide the following:
Mortgage agreement in principle
Bank statement of deposit if using a mortgage
Bank statement of full price of house if cash buyer
Evidence of sale of existing property
Evidence of the deposit being gifted
What Documents Do I Need to Provide for Source of Funds?
Source of funds is showing evidence of how you came to have the money for the house deposit. This differs from proof of funds as you’ll need to show further evidence of the deposit and is common for your solicitor and others to check this to eliminate any risk of money laundering.
Here are the most common sources of funds:
Savings
You must provide bank statements to prove your savings. Savings are defined as small but consistent payments into your bank account. Typically, this will be from the last 6 months, but your solicitor will let you know how much is required for your application. If you have multiple bank accounts, you will be required to submit proof of savings in each one.
Gift
The person giving the gift deposit must provide sufficient evidence of where the funds come from and will be required to sign a declaration. This states that the money is a gift and ensures that they do not wish to have a share in the property.
Inheritance
You’ll need the bank statement that shows the inheritance funds entering your bank account as well as evidence from the executor of the will. This means that your statement should indicate the money has been received from the executor's bank account.
Investments and Shares
You’ll need to supply bank statements showing the release of any investments or shares.
Premium Bonds
You will have to provide proof of your win. This includes any money received from winning the lottery.
Property Sale
If you are selling a property, you should provide as much information as possible regarding the sale. This includes a current status report.
Pension
You should submit any pension statements and relevant documents of the funds being released into your account.
Release of Dividends
You must provide the company accounts, the statement with your receipt of the money, and the dividend certificate.
Settlements
This includes any compensation or divorce settlement costs. You will be legally required to submit the confirmation issued by the court.
Funds from Outside the UK
You should let your solicitor know if you are using funds from outside the UK. Typically, funds coming from European countries are accepted without further enquiries. This includes locations within the EU as well as those with special exemptions such as Iceland, Lichtenstein, Norway, and Switzerland.
If any money is coming from beyond Europe or from high-risk locations, your solicitor may require further proof.
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Finding a Conveyancer
Whether you are buying or selling a property, an efficient solicitor is vital to ensure a smooth conveyancing process. Solicitors who act on proof of funds checks promptly can help avoid unnecessary delays and disappointment.
As a result, we recommend comparing different conveyancing solicitors to find a firm that suits your needs and expectations. Compare My Move can connect you with the best conveyancers operating in your area. Fill in our conveyancing comparison form to compare up to 5 quotes and save on your fees.
For added peace of mind, our conveyancing partners have passed our strict verification process. This includes providing proof of regulation by one of the following regulatory bodies:
Solicitors Regulation Authority (SRA)
Council for Licensed Conveyancers (CLC)
Law Society of Scotland (LSS)
Law Society of Northern Ireland (LSNI)
Chartered Institute of Legal Executives (CILEX)
Once your solicitor has checked your funds, you’ll need to arrange a property survey. Our integrated surveying and removal comparison form matches customers with up to 5 surveyors and up to 6 removal companies.
FAQs
Can a Solicitor Reject My Proof of Funds?
Solicitors can reject the proof of funds. If the evidence does not meet their criteria, they will likely request more proof rather than decline your application. Failure to provide satisfactory evidence may then result in your transaction falling through.
It is important to note that the amount of proof varies depending on your individual circumstances. This audit is simply a trail to show how the funds have ended up in your account.
What Happens if a Conveyancer Does Not Comply?
If conveyancers don’t carry out the correct anti-money laundering checks by asking for proof and source of funds, then they are at risk of being fined or could even be imprisoned.
What is Open Banking for Proof of Funds
Open Banking is a convenient way to prove funds as it verifies financial statements swiftly. This means customers don’t have to worry about downloading and printing various documents. They also don't have to wait a long time for the verification to come through.
It also means that customers and lenders have instant access to the necessary documents, ensuring a quick process.
