If you’re buying a house, your solicitor will ask you to provide evidence showing where your money is coming from. And for a lot of first-time buyers, it’s one of the biggest surprises during the conveyancing process.
You might’ve already been through affordability checks with your mortgage lender, supplied bank statements, and answered plenty of questions about your finances. So, when your solicitor asks for more information, it’s natural to wonder why.
The simple answer is that source of funds checks serve a completely different purpose. They’re a legal requirement for conveyancing solicitors and play an important role in protecting property transactions from financial crime.
We know these requests can sometimes feel daunting or overly detailed, especially if you’re buying your first home. Our team will always explain what we need and help you through the process as smoothly as possible. Let’s break down what source of funds is, provide some examples, and give you some tips to make the process easier.
What do we mean by ‘source of funds’?
Source of funds refers to the evidence showing exactly where the money you’re using to fund your property purchase is coming from. It’s all about creating a clear, traceable record of your finances. Instead of just confirming you have enough money, your solicitor needs to understand how you got it.
For example, your purchase might come from:
- Personal savings
- The sale of another property
- An inheritance
- Investments
- A gifted deposit from a family member
- A mortgage
- A loan
In a lot of transactions, the money comes from a few different places. That’s perfectly normal, but each source usually needs to be evidenced. It’s also important to remember that these checks don’t just apply to your deposit. Your solicitor might need evidence for all the money involved in your purchase.
This includes things like Stamp Duty Land Tax, legal fees, and any balance that will be paid on completion.
Why do solicitors carry out source of funds checks?
We’ve seen clients who thought that these checks were optional or just part of our internal process. They’re not. All conveyancers in the UK need to comply with the Money Laundering Regulations 2017 and other anti-money laundering legislation.
What this means is that we are legally required to verify who our clients are, understand where purchase funds have come from, and be satisfied that the money being used is legitimate.
These regulations help prevent money laundering, fraud, and terrorist financing while protecting the integrity of the UK property market. Although it can sometimes feel like extra paperwork during a time filled with so much of it, the process does protect everyone involved in the transaction, including buyers, sellers, and legal professionals.
As Lee Gilder, Director and Head of Residential & Commercial Property, explains:
“Source of funds checks aren’t about making things difficult for clients. They’re a legal requirement that helps protect everyone involved in the transaction. So, the earlier we can review that information, the easier it is to keep a purchase moving.”
Isn’t that what my mortgage lender already does?
This is probably one of the questions we hear the most often. And the answer is no. When you apply for a mortgage, your lender is mainly interested in whether you can afford the repayments. They’ll usually review recent bank statements, income, and expenditure before deciding whether they want to lend to you.
We’ll be looking at something different. We’re interested in the origin of the money itself. For example, your lender might be satisfied that you’ve saved £40,000. Your conveyancer still needs to understand how those savings were accumulated and be able to evidence that if needed.
Yes, both processes involve financial information. But they have very different purposes and different legal requirements.
When are source of funds checks required?
Source of funds checks are carried out whenever you’re purchasing a property, on any transfer of monies that are not legal fees – however, this can depend on the firm you are with. This can include:
- Buying your first home
- Moving house
- Purchasing an investment property
- Buying a second home
- Buying commercial property
- Purchasing land
- Buying with cash
- Buying with a mortgage
Even if you’ve been through the process before, your solicitor will usually need to carry out fresh checks for your new transaction. Every purchase is different, and the regulations require firms to assess each matter individually.
What evidence might you need to provide?
The documents you’ll need will depend on where your money has come from. In the most straightforward cases, it might simply be a series of bank statements showing savings building up over time. Other situations might require additional evidence. Let’s break some of those down.
Savings
If you’ve been steadily saving, your solicitor might ask for around 12 months of bank statements showing how those funds accumulated.
Mortgage funds
You’ll usually need to provide your mortgage offer or agreement in principle as part of the transaction.
Gifts
Sometimes, a parent or another family member will help you buy a property with a gifted deposit or, in some cases, a larger portion of the cost of the house. In these scenarios, your solicitor will normally ask for:
- A gift declaration form or letter
- Proof of the donor’s identity
- Proof of address
- Bank statements showing the source of the gift
Inheritance
Where funds have come from an estate, probate documents and evidence of the money being transferred may be required.
Sale of another property
If you’re using money from selling your previous home, your completion statement and evidence of the funds reaching your account will usually be sufficient.
Investments
Money released from shares, ISAs or other investments will often require sale documentation together with supporting account statements.
Loans
If part of your purchase is being funded through a loan, you’ll normally need to provide the loan agreement and supporting documentation.
Every case we deal with is different. If your circumstances are unusual in any way, your conveyancer will explain exactly what information is needed.
What if my money has come from several places?
This is extremely common. Perhaps you’ve saved for several years, received some inheritance from a relative, and have been gifted part of your deposit by your parents.
None of these is unusual. The important thing is that your solicitor can follow the journey of the money from its original source through to the account being used for your purchase.
If funds have moved between several accounts over time, you might just need to provide additional statements so there’s a clear paper trail.
What is the difference between source of funds and source of wealth?
While source of wealth helps to establish how someone has accumulated their wealth, such as through an inheritance, the sale of a property, investments or employment, source of funds focuses on the money being used for a specific transaction.
Source of funds checks help solicitors verify that the money is being transferred from accounts held in the client’s name and that it can be traced where it has moved between multiple accounts or transactions. Together, these checks are an essential part of meeting anti-money laundering obligations and helping to ensure transactions are legitimate.
Can source of funds checks delay my purchase?
They can, particularly if the information arrives late or documents are incomplete. In fact, one of the most common causes of delays in conveyancing that we see is waiting for source of funds evidence.
Things like missing bank statements, gaps in transaction history, large unexplained payments, cash deposits without the supporting evidence, and overseas funds that need further verification can all slow things down.
And until satisfactory evidence has been provided, your solicitor might not be able to exchange contracts or complete your purchase. That’s why it’s always worth gathering your paperwork as early as possible.
How long do source of funds checks take?
There’s no single answer because, again, every transaction is different. But the more straightforward cases where funds come from one savings account can often be reviewed quickly.
On the other hand, more complicated purchases involving multiple accounts, gifts, overseas transfers, or investment portfolios can take longer, especially if further questions need to be answered.
The biggest factor affecting timescales is usually how quickly documents are provided. Responding promptly to requests and supplying complete information at the outset often helps avoid unnecessary delays later in the transaction.
As Daniel Parker, our Conveyancing Manager, puts it:
“Most source of funds checks are straightforward when clients prepare early. If we’re given a clear picture from the beginning, we can review everything much more efficiently and keep the transaction progressing.”
Six tips to make the process easier
Although source of funds checks can seem overwhelming at first, a little preparation makes a big difference. If you’re planning to buy a property, it helps to:
- Start collecting documents before you find a property
- Keep your bank statements organised
- Tell your solicitor early if you’re receiving a gifted deposit
- Mention any overseas funds or unusual transactions from the outset
- Avoid moving money between multiple accounts unnecessarily where possible
- Respond quickly if your conveyancer asks for additional information
Being open about your circumstances helps your solicitor identify exactly what’s needed and avoids unnecessary back-and-forth later.
How Cooklaw Solicitors can help
Buying a property involves plenty of paperwork, and source of funds checks are only one part of the process. We believe good communication makes all the difference. We’ll explain what documents are required, answer your questions in plain English and work with you to minimise unnecessary delays wherever possible.
Our experienced residential property team supports buyers throughout every stage of the conveyancing process, helping transactions progress as efficiently as they can while meeting all legal requirements.
Whether you’re buying your first home, moving house, or expanding your property portfolio, we’re here to guide you through every step. For a free, no-obligation quote, you can fill out an enquiry form, call us on 0191 567 7244, or send the team an email at info@cooklaw.co.uk. We look forward to hearing from you.
