Mortgage Retention

Northernboy11

Hi,

I've just been told that our bank will lend us the mortgage but with a retention of £10K until specified works are complete.

I may be being stupid here but have got confused about this and was hoping someone could put it in layman's terms for me.

With a retention of £10K on a mortage of £250,000 this means that they will lend £240,000 and I make up the £10K difference.

Do i then need to find another £10K to get the work done? That way meaning for a retention of £10K i actually need £20K to complete the sale and get the work done before retention is released?

have i got this completely wrong?

Please help a confused buyer!!

Thanks.

rrf494g

are you getting a 100% mortgage? IE the agreed house price is £250,000? Have you no savings? A retention of £10,000 is just that, they only release £240,000 until the work is completed. They will provide a mortgage of £240,000 (with the work not done) they will provide a total mortgage of £250,00 when it is done.

It seems remarkable that you have got a 100% mortgage on a house that needs work, so I think there is a number missing from your first post.

Northernboy11

no not a 100% mortgage.

we have a mortgage of £250,000 with 10% deposit of £27,800 on a house sale price of £277,800 but this is almost irrelevant to my question.


what i was asking is that we have the £10K to cover the retention in order to complete the sale but do we need to find another £10K to cover the work? is that how retention works?

GMS

Ask the vendor to have the works carried out prior to completion. That way you are not funding the works or the difference as the retention could be lifted once works completed.

Northernboy11

that is one option but they are paying for some works already so not likely.

In response to my original question am I correct in thinking that is how retention works? on my original figures I would have to find £20K?

thomasdown

What you have said is correct. They will give you the full amount of £250k when the work is completed. But for now only £240k will be granted. You will have to find the other £10k? I had the same happen to me for £12.5k. (Bank of Mum and Dad came in handy). When you get the work done they will then give you the other £10k which you can pay the relevant people who you borrowed it off. (If you managed to borrow £10k off someone) Its annoying but it could have been worse they could have refused you the mortgage all together. Bare in mind though it took 4 weeks for the bank to send someone round to clarify the work had been done to a satisfactory level in my case, but we got there in the end. I do believe the retention only lasts for a valid time - dont quote me on that though. In total after receiving their revised offer, it took another 2 months to get work done and get the money from the mortgage company? (mum and dad got there money back eventually)

Good Luck and keep us informed with regards to what happened?

p.s. yes you will have to find the money to do the work, either make a lower offer if you can or you will have to swallow it?

kingstreet

Northernboy11 wrote: »

With a retention of £10K on a mortage of £250,000 this means that they will lend £240,000 and I make up the £10K difference.

Do i then need to find another £10K to get the work done? That way meaning for a retention of £10K i actually need £20K to complete the sale and get the work done before retention is released?

Exactly right.