Anxious about transferring your house deposit to your solicitor? It is a large sum of money, usually in the tens of thousands or even hundreds of thousands, and there have been cases where first time buyers have lost the entire sum of money when transferring a deposit to a solicitor for a house purchase.
How do you safely transfer your Mortgage Deposit or Exchange Deposit to your conveyancer so that it reaches them without issues? There are a few things you should do to ensure your deposit gets to your solicitor safely and in a timely manner.
How long does it take to transfer money to a solicitor?
Call your bank to find out how long a transfer will take.
Usually, a transfer to your solicitor will arrive within a few hours, as the transfer can be done via Faster Payments, which has a limit of £250,000. However, if you are transferring a larger deposit amount, your payments will have to go through another system, CHAPS. This is slower than Faster Payments but should still arrive the same day or the next day. Finally, make sure your payment is not going through BACS, which can take up to three days to arrive.
However, do not assume that just because your Mortgage Deposit transfer or Exchange Deposit transfer is less than £250,000 that it will go through Faster Payments. Your bank might have set lower limits for Faster Payments, or your account might be ineligible. Do ring your bank ahead of time to find out the exact timeframes for your deposit transfer, so that it does not hold up either exchange or completion.
In the past, you could also transfer your house deposit to your solicitor via a personal cheque. However, this is not recommended due to the extra risks (e.g. getting lost in the post) and the extra time it takes. These days, many solicitors will not accept or strongly discourage you from sending your house deposit in a personal cheque, due to the extra work and hassle for them.
Make sure your house deposit money is in an easy access account
In the weeks up to exchange, you should keep your exchange deposit in an easy access account. This is either a Current Account, or an Easy Access Savings account. Do not keep your money in a Notice Savings Account or a Fixed Term Savings Account, as it will take longer to get your money transferred to your solicitor.
Even in an Easy Access Savings Account, you might find that the bank does not allow you to transfer to a third party account (i.e. your solicitors)! So the safest way is to transfer your entire house deposit, at least a week or two before exchange, into your Current Account so that it is ready to be sent when required.
The key exception to this rule is if your house deposit is in a Lifetime ISA or a Help To Buy ISA. Then do not withdraw your money from the ISA into your Current Account or Savings Account! You will lose your first time buyer bonus by doing so. You will need to fill in a special Lifetime ISA declaration form, send it to your solicitor, who will then contact your Lifetime ISA provider to transfer the funds directly to them. This is the only way to protect your 25% Lifetime ISA bonus.
Get the right bank account details for your solicitor
Increasingly in recent years, fraudsters have been able to steal first time buyer deposits by providing false bank account details to the unwitting home buyers. How? Often they will hack into a solicitor’s email account, and send you doctored bank account details. These are, of course, not the solicitor’s bank account details, but the scammers! Once a bank transfer has been made, it is exceedingly difficult to retrieve the money, especially if the error is only found out a few days later.
Therefore, there are two things you need to check when you receive bank account details from your solicitor, either by email or by post. The first check to do: does it match the bank account details that the solicitor has sent before, earlier in the conveyancing process, when they asked for money to pay for their fees and searches? If it does not match, that should raise alarm bells.
The second check you should do is to call your solicitor by phone, verify that it is your solicitor on the line (ask a detailed question about your purchase that scammers would not know), and ask your solicitor to repeat their bank account details over the phone, so you can confirm the written ones you received by email or post. Make sure you do not call the phone number in the email – it might be the scammer’s – instead find a number from an earlier email from the solicitors.
Ask the solicitor to monitor for your deposit bank transfer
When you have made the deposit bank transfer, drop an email or call to the solicitor to let them know the money is on its way. Ask them to check in with their finance team every hour or so, until the money has arrived, and to let you know the moment it lands safely. If the money still has not arrived after a few hours for Faster Payments, or within a day with CHAPS, it is probably time to raise the alarm and double-check your transfer with your bank.
Should I send my Mortgage Deposit with my Exchange Deposit?
Before we go into this, we should explain the difference between a Mortgage Deposit and an Exchange Deposit. A Mortgage Deposit is the money your mortgage lender requires for you to put into the property. If it is an 85% LTV mortgage, then you will need to pay 15% of the property purchase price. This sum is only due at Completion.
However, an Exchange Deposit is required at the time of exchanging contracts, which is usually days or weeks before Completion. This deposit, for Exchange, is to give a guarantee to the seller that you are going to purchase the property. Typically, this is 10% of the property price, but not always.
The Exchange Deposit (~10%) amount is often less than the Mortgage Deposit (~15-25%). So you might find yourself asking whether to do two transfers, once for the Exchange Deposit, and the second one later on for the rest of the amount to make up the Mortgage Deposit. Or transfer the whole Mortgage Deposit amount in one go at Exchange.
Both ways are acceptable. There is a very slight extra risk if you do the whole Mortgage Deposit transfer at Exchange. If the solicitor is unscrupulous and takes off with your money. But this is very, very unlikely to happen. In my opinion, you should save the hassle and just transfer the full mortgage deposit at the time of exchange to the solicitor, in one bank transfer, if you have the funds available.
The vast majority of house deposits, up and down the country every day, are transferred safely and without issues on a daily basis. Hopefully, our guide and tips above have helped you understand the safest way to transfer your house deposit to your solicitor.
By following the above steps, it will help you make the process stress-free and risk-free, so you can concentrate on other important things to do as you get to the final stage of your property purchase – Completion and Moving In!