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.
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:
Your Conveyancing Solicitor/Conveyancer
Your conveyancing solicitor will review your proof of funds to confirm the money has a legitimate source.
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.
The Seller’s Conveyancing Solicitor/Conveyancer
Your proof of funds will need to be checked by the seller’s solicitor. They will then inform the seller that you can afford the purchase.
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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.
Read more on What is a Conveyancer and What Do They Do?
What Documents Do I Need to Provide for Proof of Funds?
To prove your funds, you’ll need to disclose the amount of funds and the source of funds.
The amount of funds simply means you can prove you have the deposit and have met the affordability criteria.
The source of funds applies to the origin of your money. Depending on where your money comes from, you’ll be required to submit certain documentation.
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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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.
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.
Finding a Conveyancer
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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 6 surveyors and up to 6 removal companies.
