Mortgage retention

jpcamps

Hi,

I was originally offered a mortgage on a house for £104,850.00 (85% LTV, we're paying £123k for the house) but with a retention of £2767.00. We agreed with the seller that they would cover £1900 of the repairs and we pay the rest. The work comprises damp work (approx £1500) and two separate things with the roof (approx £1300)

I have been advised by my solicitor that the mortgage company have decided to reduce the retention on the mortgage. They weren't sure why yet and what amount to. I have spoken with the mortgage company and they have advised that they were waiting for the information from the valuer before providing me the information.

This has gotten me slightly worried, as my thinking was that the mortgage company now value the house at less than £123k (with the work completed) and therefore we still need to get all of the work done before they release a smaller retention amount to us and we will need to fund the difference between the cost of repairs (still the same at £2767) and the smaller retention (let's say £1500 rather £2767). Therefore we have to pay £1267 for this difference. Would this likely be the case?

Or would it be that they now think that not all of the original work needs completing (i.e. only the damp needs repairing and the roof is ok). This would obviously be the better option, as hopefully if the vendor wasn't informed of the change in retention, then they would still pay £1900 and we could pay less. I don't know the legalities around this. If worst comes to worst then we would probably split the difference. As if they valued the house at less, then they would more than likely keep the retention the same and just lower the total mortgage offer.

Does this make sense? Which of the two reasons seems more likely?

Cheers
Joel

kingstreet

The valuer's opinion, on which the lender will base its decision, will depend on the wording of the reports and estimates you have provided for the essential repairs.

If the estimated cost of the work is less then the original suggested retention, the actual retention will be less.

If the work is not being done before completion, the lender will hold back the sum in question, so you will have to increase your deposit by that amount to make completion possible.

If the vendor has reduced the price to reflect this, the new purchase price will then be the figure on which the mortgage advance is based.

TBH until the valuer's opinion is known, this is all ifs and buts...

jpcamps

Thanks for the reply.

It's weird because I provided the estimates / quotes to the mortgage company a couple of months ago and that's what they based the retention amount on. It's only since my solicitor has resent the estimates / quotes to the mortgage company that they have come back and advised that the amount has been reduced. The original retention amount is exactly what the estimates came to. Therefore, I can only think that one of the pieces of work is no longer required for the mortgage.

If the mortgage company's value of the house had reduced then they would surely lower the total mortgage by that amount, not reduce the retention.

As you say though, it's all ifs and buts until I know for sure.