Why does the mortgage company have to source large deposits?

Mortgage lenders may require borrowers to source large deposits for several reasons, including regulatory compliance, risk assessment, and fraud prevention.

One reason is that lenders are required by law to verify the source of funds used for a mortgage deposit to comply with anti-money laundering regulations. This means that the lender must be satisfied that the money has been obtained legally and is not the proceeds of criminal activity.

Another reason is to assess the borrower's ability to manage their finances and afford the mortgage payments. If a borrower has a large deposit, it can indicate that they have saved diligently and are financially responsible. However, if the source of the deposit is unclear, it could be a red flag for the lender, as it may suggest that the borrower is relying on a loan or gift that they may struggle to repay.

Lastly, lenders may require sourcing of large deposits to prevent mortgage fraud. Fraudsters may attempt to take out a mortgage using fraudulent documents or by misrepresenting the source of their deposit. By requiring proof of the source of the deposit, lenders can help detect and prevent such fraudulent activity.

Sourcing large deposits is an important part of the mortgage application process as it helps lenders ensure compliance with regulations, assess risk, and prevent fraud.

 

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.