When remortgaging from one lender to another, it’s natural to have questions about how your mortgage payments and direct debits will be managed during the transition. This article addresses some of the most commonly asked questions and outlines best practices to ensure a smooth experience.
When buying a property with a mortgage, it’s easy to focus on rates, monthly payments, or loan sizes—but your deposit source and the evidence behind it can make or break your application. This often-overlooked detail has become increasingly important with tighter anti-money laundering checks and lender scrutiny. In this article, we explain what lenders and solicitors need to see, which sources are acceptable, and how you can avoid delays by getting it right from the start.
Acceptable Sources of Deposit
- Savings from Regular Earnings
This is the most straightforward and widely accepted source. Whether saved in the UK or in your personal accounts abroad, lenders will assess the plausibility of your savings by reviewing your income, outgoings, dependants, and duration of savings.
For example:
- A couple earning £80,000 jointly with two dependants and a consistent earning history over six years declaring £150,000 in savings is more credible than a single applicant earning £40,000 over three years with a similar family setup.
- Funds from investments
Money held in ISAs, investment portfolios, individual company shares, or from company share save schemes can all be used as a deposit source, provided you can show ownership and sale proceeds. Lenders may request valuation reports, sale transaction records, or account statements showing the transfer of funds into your account.
- Capital raised from a remortgage of another property
If you already own a property and are raising funds through a remortgage, this is usually acceptable, especially for buy-to-let purchases or onward residential moves. You’ll need to provide the remortgage offer, completion statement, and proof that the funds are available or have been transferred.
- Gifted Deposit from Family
Gifts from close family—typically parents, grandparents, or siblings—are widely accepted. However, each lender has their own criteria. Gifts from extended family (like uncles, aunts, or cousins) are accepted by some lenders but not all, so lender selection becomes key.
Lenders will check:
- That the gift is non-refundable
- That the donor has no legal or beneficial interest in the property
- That the donor has the funds and is not borrowing them
- Proceeds from the Sale of a Property
A common source, particularly for home movers. If the sale and purchase are simultaneous, evidence is straightforward. But if the sale occurred earlier, lenders will require full documentation—such as the solicitor’s completion statement and bank statements showing the deposit funds received from the sale.
- Sale of Other Assets
Funds generated from the sale of cars, jewellery, businesses, or similar are accepted with appropriate evidence. You will need to show:
- Proof of ownership
- Sale agreement or receipt
- Bank trail of money entering your account
- Repayment of a Previous Loan
If you have previously loaned money to someone and they’re now repaying you, this can be accepted as part of your deposit—provided you have clear documentation showing the original transfer and the repayment. Lenders will typically look to verify key details such as the names involved, the amount originally loaned, and the amount being returned to ensure the funds are genuinely yours. Id documents, proof of funds and a loan repayment letter will be required.
- Incentives from a New Build Developer
Some property developers offer financial incentives, such as cash contributions towards your deposit. These are generally acceptable, subject to each lender’s specific criteria. However, it’s important to note that most lenders cap the allowable developer contribution at a maximum of 5% of the purchase price. Anything beyond this may be deducted from the purchase price for lending purposes or may not be accepted at all.
Lenders will also assess how the incentive is structured—whether it’s a straightforward cash contribution, a discount on price, or a package (e.g. paying stamp duty or legal fees)—and treat each case accordingly.
Sources That Are Typically Not Accepted
While some sources may occasionally be accepted under special circumstances, the following are generally not viewed favourably:
- Loans Used as Deposit
Lenders typically do not accept borrowed money as a deposit, as this affects affordability and introduces repayment risk. Some exceptions exist (e.g. inter-family loans on specific terms), but these are rare and require full disclosure.
- Gifts from Friends
Most lenders do not accept gifts from friends, viewing them as potential undisclosed loans rather than true gifts.
- Unexplained Cash Deposits
Large cash deposits raise red flags for anti-money laundering checks. These are scrutinised heavily, and unless there’s a verifiable paper trail, they are best avoided during your deposit-building phase.
- Savings or funds originating from cryptocurrency
Due to the difficulty in verifying the origin and movement of funds in crypto wallets, most lenders do not accept deposits that were held or generated through cryptocurrency—even if the money has since been converted into a standard bank account.
- Lack of Evidence for a Valid Source
Even if the deposit source is normally acceptable, it may be rejected without appropriate documentation to support it. It’s not just the lender who needs to be satisfied—the solicitor handling the purchase is also responsible for verifying the legitimacy of the funds under anti-money laundering regulations. If the evidence is incomplete or unclear, the solicitor may refuse to proceed, even if the lender has initially accepted the deposit in principle.
Myth: “If It’s Been in My Account for a Long Time, I Don’t Need to Prove It”
A common misconception is that if funds have been sitting in your bank account for a long time, you don’t need to show the source. This is not true. Regardless of how long the money has been in your account, lenders and solicitors will still ask for evidence of its origin.
Our Recommended Approach: Be Upfront and Honest
At Nachu Finance, we strongly recommend a transparent approach when it comes to your deposit. If the source is genuine—even if slightly unusual—it’s often easier to present it honestly than attempt to frame it as something more ‘standard’.
Our role is to:
- Understand your deposit source from the start
- Anticipate the lender's stance
- Recommend a lender most likely to accept it
- Support you with all the documentation needed
This may mean a bit more admin early on, but it ensures fewer delays and surprises later.
Why Lenders and Solicitors Require Deposit Evidence
Lenders and solicitors are bound by anti-money laundering (AML) regulations. Often, solicitors request even more detailed documentation than lenders to fulfil their legal obligations. This is standard and should not be a cause for concern.
Use of Technology in Evidence Collection
Some solicitors now use third-party apps and digital tools to collect and verify documents more efficiently. This doesn’t change the need for documentation—it just streamlines the process for both parties.
Estate Agents May Ask Too
Increasingly, estate agents also request evidence of deposit before taking a property off the market. This is to ensure buyers are credible and to meet their own AML compliance obligations.
Best to Avoid Multiple Transfers
We often see cases where clients move money between their own bank accounts multiple times before the funds settle in the final deposit account. While this isn’t necessarily a problem for lenders or solicitors, it does mean more paperwork.
If your deposit has passed through several accounts—for example, from Account A to B, then C, then D, before ending up in Account E—be prepared to provide bank statements for all five accounts. Each transfer must be clearly documented to establish a full trail of funds.
To make things simpler:
- Try to consolidate funds early in one or two accounts.
- Avoid unnecessary back-and-forth transfers between accounts.
- Provide full, unredacted bank statements for any accounts involved in the deposit trail.
This helps reduce delays and makes it easier for everyone involved in the mortgage and legal process to verify your deposit source.
Common Documents Required to Prove Your Deposit
The documents required will depend on the source of the funds, but here’s a general guide based on what lenders and solicitors typically ask for:
- For Savings (from Income)
- Bank statements showing where the money is currently held.
- Supporting statements from any linked or feeder accounts.
- Savings build-up evidence: While “five years” is often cited, the actual duration depends on how long you’ve been saving. Lenders will want to see a pattern that aligns with your income and expenses. For example, one month’s bank statement per year (e.g. every June) helps illustrate this.
- For Sale of Property or Other Assets
- Completion statement from solicitor (for property sale) or sale invoice/receipt (for other assets like a car or jewellery).
- Bank statement showing proceeds credited to your account.
- For Gifted Deposits (from Family)
- Donor’s ID (valid photo ID, ideally passport or driving licence).
- Proof of donor’s funds (bank statements showing how they built or held the gift amount).
- Gifted Deposit Letter – confirming it’s a gift, not a loan, with no interest in the property (we can help you draft this).
- Bank statement showing the gift transfer into your account.
- Forex conversion documentation if gifted from abroad.
- For Repayment of a Previous Loan Given by You
- Proof of the original loan transfer from you to the borrower.
- A letter from the borrower confirming it is a repayment, not a new gift or loan.
- Bank statement showing the returned funds entering your account.
- General Best Practices
- Provide clear copies of all bank statements (PDFs, not screenshots, with no redactions).
- Highlight relevant transactions where needed to help the case handler or underwriter.
- Be proactive—gather all relevant documents early and keep them in one place.
How Nachu Finance Can Help
We can’t make an unacceptable source of deposit magically become acceptable—but we can help you find a lender who will work with your circumstances.
Over the years, we’ve built long-standing relationships with a wide range of mortgage lenders. This allows us to understand which lenders are more likely to accept specific deposit sources that others may decline.
Our client-first approach means we always deal with this important aspect of the mortgage process upfront. By understanding your deposit position early and matching you with the right lender, we help avoid unnecessary delays or disappointments later.
Back in 2013, Rishi, a first-time buyer earning a basic salary of £74,000 plus an annual bonus of over £10,000, was keen to purchase his first home priced at £250,000. While affordability for the mortgage wasn’t an issue, the main challenge was the deposit—he didn’t have enough saved.
To bridge the shortfall, Rishi was willing to take out a personal loan. However, using a loan as a source of deposit is typically not accepted by most mortgage lenders, as it impacts both affordability and risk perception.
At Nachu Finance, we reviewed the case carefully. Given that the overall affordability remained strong even after accounting for the personal loan repayments, we approached one of our trusted high street lenders—known to consider such scenarios on a case-by-case basis. After discussing the application directly with our relationship manager at the bank and presenting the full picture transparently, the mortgage offer was issued without delay.
We also advised the solicitors upfront about the arrangement and confirmed that the lender had approved the use of a personal loan for the deposit. The purchase completed smoothly, without any last-minute hurdles.
Since then, we’ve successfully supported many clients in similar situations—where the source of deposit may not be straightforward, but the case is genuine, and the affordability checks out. With the right guidance and lender selection, even cases that don’t fit the standard mould can be placed confidently.
Our Transparency Promise
At Nachu Finance, our transparency promise means we leave no stone unturned at the outset. This includes a thorough due diligence process—where reviewing your deposit source and ensuring the evidence stands up to scrutiny is a central part.
Yes, we are on your side. But we are also realistic about what lenders and solicitors will require. That’s why we prefer to examine the deposit documentation in detail at the beginning, so we’re ready with the right explanations or supporting documents if queries arise.
So please don’t take it the wrong way if we request detailed paperwork early on—it’s all in your best interest and helps avoid issues further down the line.
Ready to Secure the Right Mortgage for Your Situation?
If there’s a way to place your case, we will find it.
At Nachu Finance, we pride ourselves on understanding each client’s unique situation. If your deposit source is acceptable to even a small number of lenders, we’ll identify them and present your case in the best possible light.
Whether your deposit is coming from multiple sources, overseas accounts, or less common routes, we’ll help you gather the right documentation and guide you every step of the way.
Contact us today for honest, experienced, and lender-aware mortgage advice that doesn’t shy away from the details.
About the Author
Sekkappan Alagu is the Founder of Nachu Finance Ltd, established in 2006. With an early career in journalism and publishing, he brings clarity and structured thinking to complex financial topics. Through the Nachu Finance Blog and Knowledge Hub, he shares insights drawn from nearly two decades of client advisory experience, helping readers make informed decisions and understand best practices in mortgages, protection and long-term financial planning.
Business Profile
Nachu Finance Ltd is a directly authorised FCA-regulated firm providing mortgage, insurance and estate planning advice to clients across the UK. The firm takes a holistic approach — considering protection, tax efficiency and long-term planning alongside property finance — maintaining high regulatory standards while keeping advice clear and easy to follow. To learn more about the firm's background and story, visit the About Nachu Finance page.
When clients ask about overpaying their buy-to-let mortgage, I often challenge them to consider whether overpaying the residential mortgage might be a better financial move.
If you have both types of mortgages, it’s important to look beyond the surface. While reducing any debt is a positive step, I firmly believe that – in most cases – overpaying the residential mortgage should be prioritised. Here’s why.
One of the most common questions new homeowners ask is about their first mortgage payment-specifically, why it appears higher than the regular monthly payment. At first glance, this can seem confusing or even concerning. Here’s a clear explanation to help you understand why this happens and what to expect.
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First Mortgage Payment: What to Expect and How to Prepare
- Date Published : March 10, 2025
- Date Last Modified : May 8, 2026
Receiving the keys to your first home is one of life’s most rewarding milestones. But in the weeks that follow completion, many new homeowners are caught off guard when they see the amount of their first mortgage payment — it is almost always higher than the monthly figure shown in their mortgage illustration. This is not an error, and it is not your lender charging you extra. It is simply the way mortgage interest works around your completion date. This article explains exactly why your first mortgage payment is higher than expected, walks through a real-life example, and tells you what to do to prepare.
Why Your First Mortgage Payment Is Higher
When you review your mortgage illustration or mortgage offer, you may notice that the first month’s payment is higher than the standard monthly amount. This is not because lenders charge extra in the first month. It is because you may be paying for more than one full month of interest.
Mortgage offers are prepared before completion takes place, so they are based on an assumed start date. Once your mortgage completes, the lender calculates your first payment based on the actual date funds were released — and this often means you are charged interest for the remaining days of your completion month in addition to a full month’s payment for the month that follows.
How the First Payment Is Calculated
Once your mortgage completes, your lender will send you a welcome letter confirming the exact details of your first payment. The calculation works as follows:
- Pro-rated interest for the month of completion — If your mortgage completes part way through the month, you will be charged interest from the day the lender releases the funds until the end of that month.
- Your full mortgage payment for the following month — This is the standard monthly payment that will continue from the second month onward.
Because the calculation is based on your actual completion date, the amount will differ from the figure originally shown in your mortgage offer. However, from the second month onward, your payments will normalise and you will pay for one full calendar month at a time.
It is also worth noting that the date of your first mortgage payment may differ from the direct debit date you originally selected. This too will regularise from the second month onwards.
Worked Example — Shankar & Maya
To bring this to life, let’s look at a real scenario.
Shankar & Maya complete the purchase of their first home on Friday, 7th March. Their mortgage lender, Halifax, releases the funds on 6th March.
- Regular monthly payment: £1,354.35 per month
- Interest rate: 4.25% for the initial two-year fixed period
- Preferred direct debit date: 5th of each month
What Happens Next?
On 5th April, Halifax is likely to collect the following:- Interest-only payment for 25 days (6th–31st March) at 4.25% = £714.04
- Full mortgage payment for April = £1,354.35
- Total first payment collected on 5th April = £2,068.39
A Slightly Different Scenario
If Halifax had released the funds on 29th March instead, there would not have been enough time to collect the first direct debit on 5th April. In this case, Halifax would notify Shankar & Maya that their first payment would be collected on 10th April. The first payment would still be slightly higher than usual — but not significantly so. Only two extra days of interest (30th–31st March) would be added, amounting to an additional £57.12 on top of their regular monthly payment.What You Can Do to Prepare
Since each lender has its own procedure for calculating the first mortgage payment, it is difficult to guarantee that it will align exactly with a standard full month’s charge. However, there are clear steps you can take as a soon-to-be homeowner:
- Ensure sufficient funds — Keep extra funds in your designated bank account to cover any variation in the first payment.
- Monitor your payment date and amount — Watch for communication from your lender, which will confirm the exact amount and date of your first direct debit.
- Double-check your direct debit details — At Nachu Finance, we always advise clients to verify their direct debit setup before and after completion to avoid any administrative errors that could cause payment issues.
How Nachu Finance Can Help
At Nachu Finance, we support clients at every stage of the property ownership journey — from securing the right mortgage to planning the long-term management and transfer of property assets. Understanding how your mortgage works from day one is part of the foundation we help you build. If you have questions about mortgage options, protection, or want to explore how estate planning can safeguard your property for future generations, our team is here to help. Get in touch today and we will be delighted to find the right solution for your needs.
Frequently Asked Questions
Mortgage offers are prepared before completion takes place and are based on an assumed start date. The higher figure shown covers pro-rata interest from that assumed date to the end of the month, plus a full month’s payment. Once your mortgage completes on the actual date, your lender will recalculate and confirm the precise first payment amount in your welcome letter.
Your first payment is higher because it covers two things — interest charged from the day your mortgage completes to the end of that month, plus a full month’s payment for the month that follows. From month two onwards your payment returns to the regular amount shown in your mortgage illustration.
Not always. Depending on when your mortgage completes, there may not be enough time for your lender to set up the direct debit for your chosen date. Your lender will notify you of the exact date and amount of your first collection. From the second month onwards your direct debit will run on your selected date as normal.
If your mortgage completes late in the month, the pro-rata interest element will be small — covering only the final few days. However, your lender may not have enough time to collect the first direct debit on your chosen date and may take it a few days later instead. In the example of a 29th March completion with a 5th April direct debit date, only two additional days of interest applied — adding just £57.12 to the regular monthly payment.
About the Author
Sekkappan Alagu is the Founder of Nachu Finance Ltd, established in 2006. With an early career in journalism and publishing, he brings clarity and structured thinking to complex financial topics. Through the Nachu Finance Blog and Knowledge Hub, he shares insights drawn from nearly two decades of client advisory experience, helping readers make informed decisions and understand best practices in mortgages, protection and long-term financial planning.
Business Profile
Nachu Finance Ltd is a directly authorised FCA-regulated firm providing mortgage, insurance and estate planning advice to clients across the UK. The firm takes a holistic approach — considering protection, tax efficiency and long-term planning alongside property finance — maintaining high regulatory standards while keeping advice clear and easy to follow. To learn more about the firm's background and story, visit the About Nachu Finance page.
Best Practices for Every Homeowner
When purchasing a property jointly in personal names, there are two ways to structure ownership: Joint Tenancy or Tenants in Common. The choice between these options plays a significant role in inheritance, estate planning, and financial arrangements. Understanding the key differences ensures you make an informed decision that aligns with your long-term goals.
Many clients wonder whether they should purchase a property in joint names, especially if they can afford it in a single name or if one partner does not have an earned income. Some mistakenly believe there are advantages to purchasing a property in a single name. Let’s explore why joint ownership is often the better choice and debunk some common myths along the way.
As we step into 2025, the mortgage market is brimming with questions. How will interest rates evolve? Will property prices stabilise? And what can homeowners and landlords expect? Let’s explore the key trends and actionable insights for the year ahead.
It’s common for clients to ask about the mortgage rates we can secure for them even before sharing their details. While understandable, this approach might not lead to the best outcome for you.
No adviser can responsibly quote rates without assessing your unique circumstances. Advisers who share rates upfront are often using generic figures to win your business, which may not apply to your situation. This can lead to disappointment or unexpected costs later.
The way lenders price the fixed rates they offer for new business is based on SWAP rates, which are driven by market conditions and sentiment. This makes mortgage rates inherently volatile, especially when SWAP rates change drastically.
Volatility in mortgage rates is not uncommon in the UK. While neither clients nor advisers can control the market, understanding what you can do in such a market is key to protecting yourself from rate fluctuations.
In today’s housing market, recent policy shifts and economic trends are creating unique opportunities for first-time buyers. From increased loan-to-income ratios to reduced investor competition, here are the key reasons why now might be the ideal moment to secure your first home.
It’s common for clients to ask if they should wait for the next Bank of England’s Monetary Policy Committee (MPC) meeting before deciding on the mortgage rates available to them. The idea behind waiting is understandable, as many assume that the Bank of England’s base rate has a direct and immediate impact on mortgage rates. However, in most cases, the answer is no, and here’s why.
While the Bank of England’s MPC meets approximately every six weeks to review and decide what should happen to the base rate, this does not directly determine the mortgage rates that lenders offer for purchases, remortgages, or product transfers. Let’s explore why this is the case.
Base Rate vs Mortgage Rates
The base rate, set by the Bank of England, is a tool used to control inflation and manage economic stability. It influences the interest rates that banks pay to borrow money, but it’s just one of many factors that affect mortgage rates. Mortgage lenders set their rates based on several other considerations, with SWAP rates being one of the most critical factors.
Understanding SWAP Rates
SWAP rates are essentially contracts that banks and mortgage lenders use to manage the risk of future interest rate changes. When a lender offers a fixed-rate mortgage, they rely on SWAP rates to hedge against future changes in the cost of borrowing. In simple terms, a SWAP rate is a type of contract where two parties agree to exchange interest rate payments, usually switching from a variable rate to a fixed rate.
The important point here is that SWAP rates are not directly tied to the Bank of England’s base rate. Instead, they are influenced by the broader financial markets, which consider future economic expectations. SWAP rates can fluctuate independently of the base rate, driven by factors like market sentiment, inflation forecasts, and global economic conditions.
What Affects SWAP Rates?
Unlike the more predictable base rate, SWAP rates are dynamic and can fluctuate daily. Here are some of the factors that influence SWAP rates:
- Market Sentiment: If investors expect interest rates to rise in the future, SWAP rates may increase even if the current base rate stays the same. This can result in higher fixed-rate mortgages.
- Inflation Forecasts: When inflation expectations rise, so do SWAP rates. Since fixed-rate mortgages are based on long-term borrowing costs, an anticipated rise in inflation will push SWAP rates higher, even if the base rate remains unchanged.
- Global Economic Conditions: Economic events in other countries, such as changes in US Federal Reserve policies or geopolitical developments, can influence SWAP rates in the UK. This adds further volatility that is not directly linked to the Bank of England’s base rate.
What Does This Mean for Homeowners and Buyers?
Because mortgage rates are more closely linked to SWAP rates than the base rate, waiting for the next Bank of England decision is often unnecessary. By the time the MPC makes its announcement, lenders have usually already adjusted their mortgage rates based on broader economic forecasts. In many cases, the impact of the base rate change may be far less significant than expected.
What Action Can You Take?
The best approach is to secure the best available rate now, and if rates decrease before your mortgage completes, you can often switch to a lower rate without penalty. Here’s how it works:
- For Purchases or Remortgages: You can secure a rate and make changes up until one week before completion. This gives you flexibility in case better rates appear after you’ve locked in your deal.
- For Product Transfers: If you’re staying with your current lender and switching to a new product, you have the option to change rates up to two weeks before your fixed-rate mortgage expires.
If you don’t secure a rate now and rates increase, you could miss out on today’s lower rates. Once your application is submitted, most lenders will allow you to benefit from any rate reductions that happen before completion, without penalizing you if rates go up.
Many lenders also allow multiple changes during this period, including switching between products. For example, you could move from a two-year tracker to a five-year fixed-rate mortgage for more stability.
Why This Works in Your Favour?
By securing the rate now, you protect yourself against potential rate increases while retaining the flexibility to benefit from rate reductions or product changes. In short, there’s no downside to locking in a rate today, and it ensures you don’t miss out on more competitive deals later.
If you choose to select a mortgage lender and product yourself, then comparison websites are useful for getting an overview of available mortgage rates on any given day. However, if you select a lender and product based solely on these results and apply for the mortgage directly, the responsibility of tracking rate changes falls entirely on you.
On the other hand, if you engage a mortgage adviser, you gain more than just a snapshot of the market.
Working with a mortgage adviser offers a proactive approach, ongoing market monitoring, and personalised advice—making sure you don’t miss out on better deals or make decisions based solely on the numbers at one point in time. This hands-on support helps ensure that your mortgage choice is optimal for your specific needs and future-proofed against changes in the market.
About the Author
Sekkappan Alagu is the Founder of Nachu Finance Ltd, established in 2006. With an early career in journalism and publishing, he brings clarity and structured thinking to complex financial topics. Through the Nachu Finance Blog and Knowledge Hub, he shares insights drawn from nearly two decades of client advisory experience, helping readers make informed decisions and understand best practices in mortgages, protection and long-term financial planning.
Business Profile
Nachu Finance Ltd is a directly authorised FCA-regulated firm providing mortgage, insurance and estate planning advice to clients across the UK. The firm takes a holistic approach — considering protection, tax efficiency and long-term planning alongside property finance — maintaining high regulatory standards while keeping advice clear and easy to follow. To learn more about the firm's background and story, visit the About Nachu Finance page.
