Buying a property can often feel like a long process, from applying for a mortgage, house hunting, completing all of the necessary legal aspects, to finally getting the keys to your new home. When a buyer is reaching the end of the process, there could be questions surrounding how and when the mortgage funds will be released. In this article, we will be looking at what mortgage funds are, the process that lenders have to follow to release them, and typical time frames you can expect.
Mortgages can seem complicated, but with the help of an expert adviser like ond of our team at Finance Advice Centre, you will be guided through the application process and given all the support you need to hopefully be most successful in securing your loan.
At what stages are funds needed?
After an offer to buy a property has been accepted by the vendor, the solicitors acting for both parties can start the process of legally transferring the property to the buyer. When contracts are exchanged between the parties, there is a legally binding agreement between the vendor and the purchaser to buy or sell the property. The contract will detail the property purchase price as well as any further terms and conditions that have been put forward by either party during negotiations. The cleared deposit funds will be required to be with the solicitor before completion.
Deposit funds must be transferred to the solicitors from the buyer. It is likely that this transaction will involve moving a large sum of money and therefore normally a specific type of bank transfer is needed. After the exchange of contract, a completion statement is created by the solicitor, deconstructing the balances owed, including any stamp duty and solicitor fees payable.
Then a transfer deed is prepared, again by the solicitor to organise the legal change of ownership of the property and the solicitor will then draw the mortgage funds from the lender ready for completion, to make sure that cleared funds are readily available for completion. The solicitor will send the full payment of the property to the seller’s solicitor, and in return, receive the title deeds.
From this you can see, there are multiple stages that take place during the process of buying a property and funds need to be both received and cleared in time for each step.
How long does it take to release mortgage funds?
The timeframe for releasing mortgage funds does vary from lender to lender. However, it is common for funds to be released between 3 and 7 days. A solicitor can request the funds from the lender a bit earlier before the scheduled date of completion to provide extra time for the funds to be received and cleared.
How long can a solicitor hold mortgage funds?
Every lender will have set rules for how long a solicitor can hold mortgage funds for. If the funds are not used within that time frame, either fully or partially, the solicitor must give the funds back to the lender.
Money laundering checks
As previously mentioned, time needs to be allowed throughout the process to make sure the funds are clear after being moved between banks. Also, checks must be completed to ensure the source of the funds in relation to anti-money laundering or AML legislation.
The AML regulations aim to prevent criminals using professional services to launder money in the UK and cover a range of entities including the selling estate agent, the mortgage lender, and the solicitor. So, don’t be concerned if you’re asked to prove the source of funds multiple times.
The law states that prospective mortgage applicants need to provide proof of:
- Their identity
- Their address
- The source of funds to comply with anti-money laundering regulations
There is an approved list of documents that can be provided as evidence to meet the criteria of the AML checks, including passports, driving licences, bank account statements for savings accounts, mortgage in principle documents or evidence that the money has been gifted or inherited in a will for example. Solicitors might ask extra questions if needed and request further documentation in certain circumstances, such as if the buyer is a cash buyer.
Can the process be sped up?
The process of buying a property can sometimes feel like it will never end, but there are reasons why added checks are undertaken and the funds need to be cleared so that you can move onto the next steps.
Legal procedures like this cannot be sped up or rushed however, you can make sure that everything is in place to help things run as smoothly as possible by ensuring:
- Deposit funds are in an accessible place and have cleared in plenty of time
- You have funds available to pay the solicitor when needed
- Funds are available to pay any additional fees such as Stamp Duty
- You have proof of the source of the funds
Contact Finance Advice Centre today if you have any further questions about mortgage funds or other mortgage-related questions.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.