Been offered a mortgage but has a retention

Johnleddo

Hello,
I'm just looking for some advice really. I have applied for a mortgage on a house which is going to be a project so it's quite run down. I have been offered a mortgage but it has a retention on it for some of the funds and I'm wondering what my options are now.

Obviously i could make up the shortfall to purchase but then I'll need about the same amount again to carry out the works they have specified (roof, electrics, asbestos removal, pointing) all things I had planned to do anyway but the money I would have used will be making up the shortfall for the purchase.

If anyone has any ideas, thoughts or experience of these situations I'd be very grateful to hear from you.
Many thanks
John

wymondham

I may be wrong but do you usually have a mortgage when doing up a house with so much work needed, hence the retension?

holly_hobby

You may apply to have retention (either partly or wholly) released once the works have been completed, and the lenders surveyor has re-inspected and signed the same off.

Unfortuantely between then and completion, you will have to source the reqd repairs etc from your own funds (or don't address those that are non-essential), and leave the retention as it is..

However, this is an excellent opportunity to use this as a bargaining tool with the vendor. although I do note you state its being purchased as a project.

In view of this, the vendor may be accomodating on some of the repairs - esp if essential (and if the agreed sale price, has not taken into consideration all raised areas of concern.

Hope this helps

Holly

Johnleddo

Thanks for the info Holly. I've considered the option of negotiation and its something I may approach the vendor with however they have already accepted our offer which is significantly below their asking price so I would need to be sure i had few other options as I feel the work required has already been considered.

Also do you mean the mortgage company might release the retention in sections ie when the roof is fixed a portion of the retention might be released? This could be a more workable situation. Also do you know if people ever contact the surveyor and ask for some clarification on the work they have specified?

holly_hobby

What are the repairs notes as ... essential or advisory ?

How much as the property been downvalued by, do you have a 100% retention applied, or what is the element of retention noted by the surveyor ?

H

Johnleddo

The actual wording on the document says "repairs are recomended as a condition of the mortgage or an engineers report required" The surveyor has applied a £10k retention on a purchase price of £113k although the amout I need to borrow is that less 15% deposit.
Thanks again
John

holly_hobby

roof, electrics, asbestos removal, pointing - I would imagine that a specialist report is reqd regardless for those highlighted points - to assess the severity or type of works reqd.

This is noted by the surveyor, as they are not qualified to give advice regarding re-wiring of a property, what is reqd to remedy the roof or if the asbestos in the property is deemed a danger to health (usually only where it is damaged or broken, and usually found where fireproofing is reqd such as a central heating boiler cupboard) - of the estimated costs involved.

Indeed, depending upon the results of the reports the retention may be increased ...

You or the Vendor may arrange for the reports, which are submitted to the lender for review. If you arrange them, make sure that the inspections/quotes are fee free - as you don't want to incur costs if avoidable.

Speak to the lender to assertain their position.

Hope this helps

Holly

chubbster_1

Some years back, I bought a house under similar circumstances. Mortgage lender wanted to hold back £5k as retention due to work that was required.

I went back to the seller, and said that my mortgage lender had valued the property as £5k less than the price, would they be willing to drop the price by £5k.

They agreed, so I then went back to the mortgage lender, and (after some time) spoke to someone there who agreed with what I was saying that if the price I was paying was £5k less they would not need to hold a retention as it now matched the price they believed it to be worth.

Might I suggest that you try the same strategy?

johnboyinsole

John,
I wouldn't be worried about offering a lower amount. I had an offer accepted significantly below the asking price and had a retention on too. When I contacted the EA to negotiate, I got more off so it's worth a try. It's still a buyer's market. Alternatively (and might be more convenient for you), why don't you ask if the seller will carry out the repairs instead so you don't need to then wonder where to get extra funds from?
John

Johnleddo

Great info thanks everyone I'll consider all of the options mentioned. I'm already getting reports carried ou but if they add upto more than the retention I won't be putting them infont of the mortgage company as the last thing I want to do is increase the retention, none of them are costing me though which is good.