Mortgage Allowance for Repairs

PaulJUK27

Afternoon,

I am in the process (with my partner) of buying our first house. We have agreed a price for the property and had a formal mortgage offer from the bank accepted as well.

A valuation survey for the property says there is an issue with the wall ties (independently confirmed) and the work will cost £1000 to correct. As such the bank have retained £2500 from the mortgage. (The £2500 was retained prior to the independent survey which valued the work at £1000 so I assume the retention will be reduced to £1000 (Hopefully!)).

In the first instance I have gone back to the estate agent and instructed them that we want the seller to pay for this work to be completed or to knock money off the price of the house (ie more than £1000 as this would only knock off £100 off the deposit and we still need to find £900).

The EA stated that the seller won't have £1000 free for the work and said potentially an "allowance" can be given which states we get the full value of the house in the mortgage but we retain £1000 for the work to be completed.

Is the above common practice? First time buying a house so a little overwhelmed with everything without this!

Thanks

Paul

fed_up_and_stressed

Retentions don't quite work that way. What happens is that the mortgage company would only forward the mortgage amount - minus the retention before completion (assuming the work was not done beforehand) so in effect you have to hand over the full balance due to the vendor. Then once the work is done (ie you paying the builder) once the mortgage company signs off the work then they released the retained amount back to you.

So in effect you have to in the short term stump up the difference between the retention and completion value AND have the readies available to do the work. So assuming the retention stays at £2.5k then you will need to budget £3.5k and get the retained £2.5k from the mortgage company afterwards.

eddddy

Actually, there are two different types of retention being proposed here...

• 1. Retention by Mortgage Lender
  i.e. The mortgage lender retains £2,500 (or perhaps less, if you can negotiate it) until the wall tie work is done

• 2. Retention by Buyer's Solicitor
  i.e The buyer's solicitor retains, say, £1,500. The buyer's solicitor uses it to pay the contractor for the wall tie work. Any left over money goes to the seller.

The net result of #2 is that the seller pays for the wall tie work.

But you will still have to find some extra cash until the bank releases #1.