Proof of income is an important part of buying a house.
The bank will often want to know that you can afford their mortgage, and the seller might want to see that you’re a trustworthy buyer.
But can you buy a house in cash without proof of income?
Read our blog below to see the answer.
What is buying a house in cash?
Buying a house in cash means that you don’t need a mortgage to complete the purchase. You already have all the funds needed up-front.
It is common if you’ve already sold your previous house and live in rented accommodation with the funds from the sale in your bank account.
There are also specialist cash-buying companies and developers who buy houses without loans.
Do I need proof of income to buy a house in cash?
You don’t need proof of income to buy a house in cash in the UK.
You don’t need a mortgage when you are a cash buyer. So you won’t be dealing with a lender and won’t need to show them proof of your income.
However, the estate agent selling the house has every right to ask you for proof of funds, as does your solicitor. This right is protected by law.
Proof of income vs proof of funds
Proof of income is documentation that verifies an individual’s earnings. Proof of funds is documentation that demonstrates an individual (or organisation) has the financial resources to complete a transaction.
You will need proof of income to get a mortgage on a house. Without it, a lender won’t give you money.
But when you’re buying a property in cash, there is no lender and estate agents won’t ask for this either.
Do I need to show the source of funds to buy a house in cash?
Yes, when you buy a house, the estate agent must ask for details about the source of your funds.
This is to comply with money laundering regulations. Your solicitor should ask to see this, too.
Examples of source of funds include:
- A series of bank statements showing that you have saved the money over a long time
- A letter from someone stating that they are gifting you the money
- Evidence demonstrating that you have received the money via an inheritance from a Will
- If the money has come from the sale of another property, you should show all paperwork surrounding this transaction.
Other common sources of cash funds include:
- Pensions
- Gambling or lottery winnings
- A compensation settlement.
And more. You need comprehensive proof of the applicable scenario. Speak to a legal expert for more guidance.
What if the source of funds is overseas?
A solicitor will sometimes decline money that has arrived from a foreign source.
This is especially likely if it’s from a country considered ‘high risk’ or someone connected to a high-risk country.
The final decision on this is at their discretion and in line with money laundering laws.
What counts as proof of income?
There are several ways that you can show proof of income. This includes:
- Your tax returns
- Pay stubs
- Bank statements
- Invoices and contracts
- Profit and loss statements
- Your accountant’s certification.
Speak to a solicitor for advice on what does and doesn’t qualify.
Can I refuse to show source of funds when buying a house?
No, not if you want the sale to proceed.
Solicitors and estate agents, amongst other professionals, have a legal duty to comply with money laundering regulations.
This involves you showing source of funds. Without it, the sale should be called off.
How long does it take to provide proof of funds?
This is something you should be able to do yourself. If you are efficient, showing a bank account or statement with the money in shouldn’t take more than a day.
Do I need proof of income for delayed financing?
Yes. If you buy a house in cash but then opt for delayed financing (taking out a mortgage afterwards), the lender will want to see proof of income.
This demonstrates that you can meet all repayments moving forward. You should consider this if it’s your plan when buying a house in cash.
