Mortgage retention advice

adfa

Hi,

We have received our mortgage offer with a £3000 retention. This is because their surveyors had suggested ceiling repair work in few rooms.

We had the ceilings checked by a qualified and regulated builder who confirmed in writing that only decorative work is required which could be carried out later when a renovation is carried out, however the lender has still decided to retain £3000.

The sale price was £146k so now the mortgage offer is £143k.

The seller has agreed to contribute £1000 towards the repair work which we have accepted as we are aware of their circumstances.

Now this is what we are thinking to do and I need your advice on it:

• We have the house price reduced by £1000 so the seller doesn’t have to pay us anything.
• We pay £2000 to the sellers and exchange contacts.
• We continue paying our £143k mortgage.
• We either don’t get the ceiling repair work done at all or have it done at our on convenience.
• Once the work has been carried out, we can decide either to get the retention released or continue with a 143k mortgage.

Would the lender have any issue with that or can they create issues with us simply because we have not carried out the repair work that they suggested within a specified time?

Thanks in advance for your advice.

shimano

I had a retention on mines of a few thousand, and I used it in conjunction with other issues to get the full retention off.

It's down to you. If you are comfortable it's low risk and want the property, then go with your instinct. If you are not comfortable, then push for the full amount.

Thrugelmir

adfa wrote: »

The sale price was £146k so now the mortgage offer is £143k.

No deposit?

We have the house price reduced by £1000 so the seller doesn’t have to pay us anything.

That will impact your mortgage offer. Also the retention will still stand.

adfa

Yes, we have 20% deposit ready. £143k means that the lender thinks the total value of the house in its present condition is £143 instead of £146k – hence the retention of £3k.

We don’t mind if the retention remains as long as the lender does not have any issues with it.

Like I said we have had a detailed survey done by a builder so we believe the lender is just being difficult. So we would like to get the ceilings repaired at a later stage. For now we just want to finish off the deal so we can move in.

This is why we are happy to pay £2k out of the retention sum to the seller.

kingstreet

Right. So the property has been valued at £143,000 but you are paying £145,000?

Your mortgage loan to value will be based on the £143,000 so you'll need to put down £28,600 deposit to be at 80% but have to find another £2,000 on top to meet the purchase price, so £30,600 in total.

If you decide to get the work done, you can then ask the lender to release the retention, but if you don't do it within six months, the retention will lapse.

adfa

kingstreet wrote: »

Right. So the property has been valued at £143,000 but you are paying £145,000?

Your mortgage loan to value will be based on the £143,000 so you'll need to put down £28,600 deposit to be at 80% but have to find another £2,000 on top to meet the purchase price, so £30,600 in total.

If you decide to get the work done, you can then ask the lender to release the retention, but if you don't do it within six months, the retention will lapse.

Thank you. Yes, we have agreed to pay the £2000 from the retention sum whilst the seller’s share will be £1000.

Forgive me for my ignorance (first time buyer!) but what does 'retention will lapse' mean?

Do we have to get the ceiling repair work done within six months? If so, is this six months from completion?

kingstreet

Yes. You have to get the work done within six months of completion of the purchase if you want to drawdown the retention monies.

If you haven't already done so, you need to report to the lender and your solicitor the reduction in the purchase price to £145,000.

adfa

kingstreet wrote: »

Yes. You have to get the work done within six months of completion of the purchase if you want to drawdown the retention monies.

If you haven't already done so, you need to report to the lender and your solicitor the reduction in the purchase price to £145,000.

What I was thinking is that we will get the work done but won't ask for the lender for the retention money as then our mortgage will be smaller. I mean we can easily save up in 6 months and get the work done in which case we will have no use for the £3k retained by the bank.

kingstreet

That's entirely your choice.