Buying a property can sometimes feel like a long process, from applying for a mortgage, house hunting and completing the legal process to finally getting the keys.
When a home buyer is nearing the end of this process, there may be questions regarding how and when the mortgage funds will be released.
In this article, we will explore what mortgage funds are, the process that lenders follow to release them and typical timeframes.
At What Stages are Funds Needed?
Following an offer to purchase a property being accepted by the vendor, the solicitors acting for both parties can begin the process of legally transferring the property.
When contracts are exchanged between the parties, there is a legal agreement binding the vendor and purchaser to buy or sell the property.
The contract will detail the property purchase price as well as any other terms and conditions that have been proposed by either party throughout the negotiations. The cleared deposit funds will be needed to be with the solicitor prior to completion.
Therefore, deposit funds must be transferred to the solicitors from the purchaser. It is likely that this transaction will involve moving a large sum of money and therefore usually a specific type of bank transfer is required
Following the exchange of contract, a completion statement is generated by the solicitor, breaking down the balances owed including any stamp duty and solicitor fees payable.
Next, a transfer deed is prepared, again by the solicitor to arrange the legal change of ownership of the property and then the solicitor will draw the mortgage funds from the lender ahead of completion, to ensure that cleared funds are available for the completion.
The solicitor will send the full payment for the property to the seller’s solicitor and in return, receive the title deeds.
As you can see, there are a number of stages that take place during the process of purchasing a property and funds needs to be both received and cleared in time for each step.
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How Long Does It Take to Release Mortgage Funds?
The timeframe in which it takes for mortgage funds to be released does vary between lenders, however, it is common for funds to be released within between 3 and 7 days.
A solicitor can request the funds from the lender slightly earlier, ahead of the proposed date of completion to enable extra time for the funds to be received and cleared.
How Long can a solicitor Hold Mortgage Funds?
Each lender will have set rules regarding the duration of time that a solicitor can hold mortgage funds. If the funds are not used, either in their entirety or partially, the solicitors must return the funds back to the mortgage lender.
Money Laundering Checks
As we have discussed, time must be allowed throughout the process to ensure that funds are clear following being moved between banks. In addition to this, checks must be undertaken to ensure the source of the funds in relation to Anti-money laundering, or AML legislation.
The AML regulations aim to stop criminals using professional services to launder money within the UK and cover a range of entities including the selling estate agent, the mortgage lender and the solicitor – therefore don’t be alarmed if you are asked to prove the source of funds multiple times.
The law stipulates that prospective mortgage applicants must provide proof of:
- their identity
- their address
- the source of funds to comply with anti-money laundering regulations
There is an approved list of documentation 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 documentation or evidence that monies have been gifted or received in a will for example.
Solicitors may ask additional questions if needed and request further documentation in certain situations, such as if the buyer is a cash buyer.
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- Refurbishment mortgages.
- Part and part mortgages.
- HMO mortgages.
- Single person mortgages.
How can the Process be Sped Up?
The process of buying a property can feel at times, like it may never conclude, however, we have discussed there are reasons why additional checks are undertaken and the fact that funds need to be cleared in order for the next steps to take place.
Such legal processes cannot be sped up or rushed however, you can ensure that everything is in place to help the process run as smoothly as possible by:
- Ensuring that deposit funds are in an accessible place and have cleared in plenty of time
- Ensure that you have available funds to pay the solicitor when instructed
- Ensure that funds are available to pay any additional fees such as Stamp Duty
- Ensure you have proof of the source of the funds
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How Long Does It Take to Release Mortgage Funds Summary
In this post, we have explored the legal process of buying property including the steps at which cleared funds need to be available and the reasons why the sources of funds are checked.
Should you have any queries regarding your personal financial situation, or the mortgage process, please get in touch with our friendly team for further mortgage advice.
Please feel free to get in touch with our friendly team of advisors to book an initial consultation to discuss the options available to you.
Call us today on 01925 906 210 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.