Mortgage retention question

ftbamy2020

hi,
I have a question about mortgage retentions. 
Property valued at £120000
Offer accepted £100000
But the property needs £10000 of work. 
Can there still be a retention of £10000 placed on the mortgage or does the fact it is being bought for £20000 under the valuation cancel that out?
Thanks.

fiision2020

When you say the property was valued at £120,000 is that the lender's valuation or the asking price? If that was the lender's valuation and the vendor has agreed to lower the price to £100,000 you would need to make the lender aware of that so that they can amend the mortgage offer accordingly.. You may still end up with the £10,000 retention as the new mortgage offer would reflect this. There are other factors such as what is your LTV ratio? Also some lenders don't offer retentions, they will either lend the money or not.

ftbamy2020

Yeah its been valued at £120000 and the lender is aware of the everything. Its a 70% LTV. We have a £30000 deposit. Just wondering what to expect.

Thrugelmir

When you say needs £10k of work. Is this reflected in the offer you've made. 

ftbamy2020

Yes we have offered £100,000. Might not even be as much as £10k that needs done I am just guessing, worst case. The surveyor has put no retention needed on the report but I don’t know if the lender will/can still want one.

fiision2020

ftbamy2020 said:

Yes we have offered £100,000. Might not even be as much as £10k that needs done I am just guessing, worst case. The surveyor has put no retention needed on the report but I don’t know if the lender will/can still want one.

Retentions are often for things like evidence of damp, electrics, new roof etc. The valuer would indicate to the lender that a retention is advised (in part or full.....that's another story) to minimise risk if you couldn't keep up your mortgage repayments and the lender had to put the property back onto the open market. Often the retention bears little resemblance to the actual remedial costs involved.
The retention would be lifted and monies released once the work has been carried out to a satisfactory level.
If the valuer has not advised of a retention on the survey report I would think it unlikely the lender would ask for one. This is of course based on limited information and if in any doubt the lender could request an additional survey. Out of interest what sort of work is needed?

Thrugelmir

The mortgage will be based on the lower of either the purchase price or the valuation. 

ftbamy2020

fiision2020 said:

ftbamy2020 said:

Yes we have offered £100,000. Might not even be as much as £10k that needs done I am just guessing, worst case. The surveyor has put no retention needed on the report but I don’t know if the lender will/can still want one.

Retentions are often for things like evidence of damp, electrics, new roof etc. The valuer would indicate to the lender that a retention is advised (in part or full.....that's another story) to minimise risk if you couldn't keep up your mortgage repayments and the lender had to put the property back onto the open market. Often the retention bears little resemblance to the actual remedial costs involved.
The retention would be lifted and monies released once the work has been carried out to a satisfactory level.
If the valuer has not advised of a retention on the survey report I would think it unlikely the lender would ask for one. This is of course based on limited information and if in any doubt the lender could request an additional survey. Out of interest what sort of work is needed?

Think some of the floorboards need replaced from previous damp and maybe damp proofing. It has been empty for years.

fiision2020

Just to clarify. When you said surveyor are you referring to the valuation survey or is this a surveyor you have commissioned yourself? I was just wondering how you got a figure of £10,000 even if just a guess. Damp proofing can be expensive but that really depends upon the extent of the damp, how many rooms affected etc. From my own experience the valuation survey picked up on evidence of damp to which the surveyor advised of a retention. The mortgage lender then requested a specialist damp report to be carried out.  

ftbamy2020

fiision2020 said:

Just to clarify. When you said surveyor are you referring to the valuation survey or is this a surveyor you have commissioned yourself? I was just wondering how you got a figure of £10,000 even if just a guess. Damp proofing can be expensive but that really depends upon the extent of the damp, how many rooms affected etc. From my own experience the valuation survey picked up on evidence of damp to which the surveyor advised of a retention. The mortgage lender then requested a specialist damp report to be carried out.  

I am in Scotland so it’s a home report which the lender is using. It says in the report that there are signs of previous damp and may need floors done in the 3 bedrooms. He has also advised that no retention is needed though. £10000 was just a hypothetical number as an example.

davidmcn

If the surveyor hasn't recommended a retention, the lender isn't going to make one up by themselves. They rely on the survey.