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Arranging your Finances during the Home Buying Process

Mortgage Finance

Once you have applied for a mortgage it should take a few weeks for matters to be finalised and for the mortgage offer to be sent out to you. You must ensure your conveyancing solicitor’s details are included in the offer letter and that they have a copy. You and your conveyancer should check to make sure the purchase price and loan amount are correctly stated. It is unlikely, in the current climate,  that you will have obtained a loan covering the whole of the purchase price (however, sometimes you can obtain special deals on new build properties) so you will have to provide the shortfall from your own funds.

Cash Buyers – Source of Funds

If you are a ‘cash buyer’ your conveyancer will ask you to provide evidence of the source of your funds for money laundering purposes. You should therefore ensure you retain all relevant bank statements and paying in slips so you can clearly show where your funds came from.  

If you are relying on funds from a third party then your conveyancer will need to find out what their interest is in the transaction and money laundering checks will also need to be carried out.

If you are funding the purchase following the sale of another property you must provide the relevant documentation or evidence to prove  this.

The Deposit

Upon exchange of contracts, which is when you will be legally committed to the purchase,   your Property Solicitor or conveyancer will have to send your deposit to the seller’s solicitor. You must therefore ensure your funds are ready and are paid into your conveyancer’s bank account at least a day or two before you exchange.   Cleared funds will be required before the deposit monies are sent to the seller’s conveyancer so if you are paying a cheque into your conveyancer’s account you must wait for several days before the funds clear. The funds are usually sent to the seller’s conveyancer by cheque or telegraphic transfer on the day of exchange.

Traditionally, 10% of the purchase price is requested as a deposit but this may be reduced by agreement between the parties.    If a reduced deposit is accepted then the buyer should be made  aware of the Standard Conditions of Sale which sets out what will happen where the buyer fails to complete. If completion does not take place and it is the buyer’s fault then the deposit is immediately forfeited and the whole 10% becomes payable to the seller.

Final Completion Funds

Conveyancers usually send completion statements to their clients before exchange of contracts so the exact amount required to actually complete the matter can be sent to the conveyancer around the time of exchange of contracts without the need to send further funds later on. (The completion statement figure should not come as a complete surprise since your conveyancer will have given you a breakdown of costs at the start of the conveyancing process. ) Having said that, there may be times when there is a delay of, say, a few weeks between exchange and completion so the buyer may not wish to send the entire completion funds during the exchange stage, preferring to send the outstanding amount nearer the time of completion. Whatever the position, you must ensure you are on top of the situation relating to funds and that cleared funds are in your conveyancer’s bank account allowing them to exchange and complete without delay. The dangers of failing to complete on time can prove costly so care must be taken to ensure this does not happen.

If you have any queries regarding the final completion statement then you should raise the matter immediately with your conveyancer.

Bridging Loan

Bridging finance may be required, for example, due to an emergency cash flow problem or for the deposit on the property with a view to repaying the loan once the mortgage funds are received from the lender. If you require a bridging loan then you must ensure the lender is notified beforehand, if  you are buying with the assistance of a mortgage.

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