Retention?

ellyp95

Hi,

So we finally had the phone call from the mortgage broker today! The valuation has come back fine, apart from one thing: the property we are purchasing has been treated for damp at some point in the past. As part of our mortgage agreement we have been asked to have someone qualified out to do a report/assessment on the property, to see if damp is going to be a problem or not.

We've also been asked to question the vendor on whether he got a guarantee/insurance in place when he had the damp proof works done, and if so if the guarantee can be transferred to our names. If this is the case we are fine and have the mortgage offer.

If there is no guarantee in place, or if it can not be put into our names - they have mentioned a retention? But I am not 100% sure on what this means, or what it is? Can anyone help me out?

Thanks

RhysHSCC

Hi ellyp

A retention means that the lender will hold back some of the mortgage funds until any recommended works by the valuer have been carried out.

You can complete and carry out the works post completion, however you will need to make up any shortfall I.e retention amount yourself. Unless you're able to negotiate price down with vendor.

ellyp95

I see. Thank you!

ellyp95

@RhysHSCC

We received the report from the contractor who surveyed the property,regarding the damp. The recommendation of work we need to have done is going to cost just under £2000, but the money that the lender was wanting to retain was £5000.

Could the lender see that it is not going to cost too much and no longer hold the retention? Or if not, could we have the work carried out before we agree to the mortgage funds being granted, so that we will be out of the retention and do not have to make up the £5000 as we don't quite have it?

Thrugelmir

Retention is set conservatively to encourage you to actually have the work done. Also building works notoriously come in at a higher cost than originally envisaged.

RhysHSCC

Hi ellyp

The size of the retention will always be determined by the callers recommendation, so the lender is more often going to go with what they say.

If the works are carried out beforehand, then the lender won't have a reason to hold onto it, but if you pay for the repairs, and the vendor decides to pull out?

ellyp95

We are happy to have the work done, but would like the retention lifting and full mortgage funds offered before proceeding with the sale completion. I was just wondering if this is a possibility?

ellyp95

Thank you Rhys

I am hoping to hear back from the lender soon as we sent them the report at the beginning of the week, so I guess we will see what they have to say.

RhysHSCC

It's uncommon from my experience to have the works done beforehand, I imagine because you could be paying repairs for a property that the vendor then may decide not to sell.

Saying that, I have also seen underwriters remove retention after receiving a valuation report back, or reducing the retention. It really comes down to the individual cases, as I tell people everyday, no two applications are the same.

Please keep us posted on what the lender says :-)

ellyp95

We are quite confident that the vendor will not pull out, as he is already in his new home and has been very good/patient so far.. But we have taken into consideration that he could still pull out.

Oh I really do hope that the lender removes the retention! Even just reducing it would be a massive help, we are just short of making the funds up; but removing it all together is what I'm hoping for. Keeping my fingers crossed!!

I will keep you posted! :-)

stator

Make sure you get it done by someone who the lender approves of. Sometimes they ask for specific qualifications or membership of a specific scheme