What does my Solicitor mean by source of funds?

When you purchase a property, large sums of money change hands. This makes it susceptible to fraud and means that if you are purchasing a property, you will need to prove how you have obtained the funds to do so.

When you speak to your Solicitor you may hear them saying that they await ‘source of funds.’ Although other solicitors and agents involved in the transaction are aware of what this means, it often causes confusion with our clients as people don’t really know what is required to satisfy this element of the transaction. It is not just a “tick box” exercise where we scan over statements, we are legally required to obtain and check this information. I promise we are not trying to be difficult on purpose or accusing you of doing anything wrong!

We don’t just need to see a statement showing the funds in a bank account, this is the “proof” of funds rather than the “source”. The source of funds will show us how the funds for the transaction have been legitimately earned or obtained. The source of funds we receive should essentially show a paper trail for how the funds originated and then how our client has come to hold these funds and whether they have the authority to use them in a house purchase. An example of this “paper trail” would be that a company pays their employee a salary, the employee saves over x amount of time, and the bank statements show this pattern of earning and saving.

Not all source of funds are the same and some are more difficult to obtain information for than others. We of course understand that the information isn’t always readily available and will sometimes take a little while to filter through to us.

Often we have clients whereby the source of funds, or at least part of it, is coming through a “gift”. The term of something being a “gift” in conveyancing and how the word is used in daily life can differ slightly. A gift is where someone who is not a named purchaser of the property is still contributing money towards the purchase. This gift does not give any rights to reside in the property and does not amount to ownership, there are various forms throughout the transaction that will have the giftor confirm this. If your giftor wants security over their money by way of putting some form of restriction on the title then this can be done alongside as a separate transaction, we would also check that the lender consents to the monies being protected. It is important that if you are getting a mortgage that you explain the circumstances of your gift to your broker/lender so that they can check this is acceptable, some lenders are only happy with certain people giving gifts, such as family members.

If you are unsure on what documents you need to provide due to it being an uncommon source – you can simply ask the team and we are more than happy to tell you. It is much easier to tell you what we need rather than to sift through mountains of documents that you think could possibly help! Whether it be from an inheritance, dividend payments, divorce settlements or just normal savings – we can tell you what we need to make the process as smooth as possible for you, you are just in charge of actually obtaining the required documents to support the source.  

For further advice and assistance please contact our Conveyancing Team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk