Mortgage retention help!

Stace-

Hi all,

Can anyone help me understand mortgage retention?

I have had a mortgage offer with a £2000 retention applied.

If I put down the extra £2000 myself and never have the work done specified in the retention (involves getting a damp/ wall tie inspection) and never go on to claim back the £2000 held back does that mean the retention no longer applies?

I have had a full building survey done which has not picked up anything sinister (damp or otherwise) so am happy to proceed with the purchase.

As we can get the extra £2000 now from savings, we wouldn't need it back on the mortgage. So would the £2000 we pay at the start effectively be a £2000 payment off the mortgage?

Hope my post makes sense to someone, because at the minute it is making no sense to me!! :rotfl:


Any help would be greatly received!

Thanks

Thrugelmir

You apply for a mortgage of £100k. The lender withholds £2k retention. So only advances £98k.

Within 6 months you have the works done to the lenders satisfaction. They will release £2k.

If not. The mortgage remains at £98k.

I would be looking to obtain a reduction in price myself.

Stace-

Thanks for your quick reply!

We will be asking for a reduction in the price but from my understanding the retention would still apply on that reduced price.

So using your example of original £100k mortgage with £2k retention. We get a reduction in price so ask for a £98k mortgage, with the retention applied we get £2k less so a £96k mortgage.

What I can't get my head around is: are we obliged to get the work done that they have specified even if we never ask for the £2k back on the mortgage?

We pay an extra £2k at the start of our mortgage to cover the retention, don't get the work done and don't ask for the money back. Could the £2k paid effectively be an overpayment that wouldn't incur a early repayment charge?

Cheers

Goldiegirl

The message the lender is giving you is that they would prefer the works done, to protect their security. Therefore they are keeping £2000 back as an incentive for you to get it done.

Once you are in the property, they may chase you from time to time to ask if the works are done, but they can't actually force you to do the work. But it would be wise to have the work done, to protect your investment .

If you have the work done, you don't have to ask for the £2000 retention to be released, if you don't want to have the money. You can just confirm to them the work is done - they may ask for proof, like the timber and damp certificate.

If the retention is not drawn down, it will simply wait until the money is required, or will eventually be deleted from the lenders records. It is not a part repayment because the money has not been advanced to you.

[Deleted User]

Glad this came up as I'm in a similar situation and my broker is not answering my questions at all. I hope to get the work done (not least because if I don't, the same issue will come up for my buyer when I come to sell it), but getting it done within 6 months could be tough. It's a flat, and the work that needs doing is external and will require some negotiation with the freeholder and the downstairs leaseholder. It's frustrating that they've put on a retention for something that's not totally within my power to get done, but I guess that's my problem and not the lender's.

amnblog

Retentions mean the valuer believes there is an issue.

Think very carefully before proceeding in this circumstances.

It is natural to get excited and brush these issues away with, 'I can afford it', 'I can't see the problem' etc .

If you went to buy a car and a mechanic told your something needed fixing, would you still buy it?

Best option is to get the vendor to do the repairs now (at their cost), then get the valuer to recheck the work (for free), have the retention lifted, then buy.

BeckyMellor225

It does depend on what they want you to do though. We had £2k retention on our previous house and again on the current one. First time it was damp basement and we needed the extra £2k so we got it tanked within time and went back for the extra money. This time it was a 5 way sealed bid situation so absolutely no way of negotiating price. £2k retention on a £615k house was for damp cellar. I agree that it is damp but its also tiny (L shaped coal hole really) with one arm only 4ft wide. If we tanked it we wouldn't actually get in there! Left it alone and just took what they offered as we had significant deposit (>50%).

holly_hobby

Yep the amount of retention (in this case 2k), is the estimated cost of works, so this will remain regardless of what the sale price is amdended/renegotiated to.

Partial retention means the works are not considered essential - but recommended.

Please do get a D&T and Structural Engr report re the possible damp and WT issues before you go any further (spend any more money) - they can be costly and problematic repairs if they go wrong. And if there are current issues revealled, you want the Vendor to sort this out, given that repairs such as this can quickly become a money pit !

Holly x

[Deleted User]

amnblog wrote: »

Best option is to get the vendor to do the repairs now (at their cost), then get the valuer to recheck the work (for free), have the retention lifted, then buy.

That's if you trust the vendors to get it done properly and it won't cause unacceptable delays. In my case, on balance, I'd rather get it done myself after completion.

vectistim

If your full survey didn't pick up on damp, or wall tie failure, why did the mortgage valuation? Are there signs of wall tie failure (horizontal cracking) - or was the surveyor just covering himself?

Stace-

vectistim wrote: »

If your full survey didn't pick up on damp, or wall tie failure, why did the mortgage valuation? Are there signs of wall tie failure (horizontal cracking) - or was the surveyor just covering himself?

We do think that the valuer is just covering himself. Nothing mentioned about it in full survey and no cracks / bowing of walls that we can see either.

The reports are all with our solicitor now to get their opinion and we are going to go back to the seller asking for a reduction based on this.

Do people tend to use just the survey results to attempt to renegotiate price or do we need to get further specialist reports/ quotes beforehand?