Mortgage Retention - how does it work?

GSTAR

Hi,

My mortgage company has placed a retention on my mortgage offer due to damp issues found at the property I am looking to purchase

It's not a large amount (around £1500 to get it all sorted). But I am a bit confused as to how this works.

The way I understand it is, I would need to find £1500 to make up the shortfall from what the lender is willing to borrow me. In addition, I then need another £1500 to get the work actually carried out.

Now my lender has advised me that they would "release" the retention once they have received confirmation / proof that the work has been carried out.

But then surely that would increase the amount I'm borrowing and consequently increase my monthly payment? So it looks like a lose-lose situation for me.

Unless I were to get that money back in cash, I can't see how this is a fair deal.

Can anyone shed some light on this?

HappyMJ

You get the money back in cash. If the mortgage is for £100,000 they'll lend £98,500. When you've got the work done they release the last £1,500 directly to you. It means you'll need to find another £1,500 to buy the property but you can borrow that from somewhere else and repay it when the funds are released. You'll also need another £1,500 to pay the company that puts in a new damp proof course unless they don't mind waiting for the money to be released and you can pay them then.

You'll be paying an extra £1,500 for the property over your original estimate. If you feel it's not worth it negotiate a £1,500 reduction in price.

TBeckett100

The £1500 retention, have you actually had quotes?

We had damp works done and it cost £3k not to mention having to redecorate and the inconvenience of it all.

It may be worth getting quotes done to make sure you know what you have to shell out as paying £3k out of your own pocket to get £1500 back may not suit your budget and certainly becomes a chat with the EA over your purchase price

Interestingly with the damp, there was no retention, we had one for the roof which I got a mate to patch up.

amnblog

I am not sure what the confusion is:


The Lender is saying they will release the mortgage £1,500 short and then can lend you the extra £1,500 once the work is done.


When you don't have the extra £1,500 you will not be paying for it - when you do you will.


If you want to pick up the cost of the damp work (which is currently the vendors problem) that is a matter for you. Deciding to do that obviously means you are £1,500 down.