Mortgage Retention advice

squishypengu

Hi everyone.

We are FTBs and recently had an offer accepted on a 3 bed semi, for £1950 below the asking price. However we’ve now got the mortgage valuation back and they’ve placed a retention of £2700 on the mortgage and also downvalued the house to 3k lower than our offer. This is because of damp and have advised we get a damp and timber survey. I’m finding all of this quite stressful and confusing! 

I still don’t fully understand what the retention actually means - I get that they ‘hold back’ part of the mortgage but what does that mean for us? From some things I’ve read I’m not sure if it’s that a) we have to pay the 2700 as extra on top of our deposit or b) we have to pay to carry out the work and then get the money back from the bank once it’s complete?

I’m also not sure what this means for our survey also - we had initially planned to get a homebuyers report but wanted to wait until the valuation came back in case this flagged anything. But now we’ve been advised to get the damp and timber survey, should we also get a homebuyers report on top of this as planned? Have we done this in the complete wrong order? I mean if there was anything else major wrong would this not have been flagged in the valuation? I’ve also read that the HBR or a survey can cause the bank to devalue the property further if it catches any other issues - could this happen?

Sorry for the stupid questions but any advice would be greatly appreciated!

Irishpearce26

Yes essentially the mortgage lender will ask the solicitor to retain the £2700 until all work is carried out on the property. You will need to find the cash to do the work but it will be repaid. If the lenders survey pick up issues i would get a more detailed report down so that you are in a stronger position to re-negotiate if further issues are found or it may highlight that there are too many issues/work to be done that you would be comfortable with and walk away.

Your lender wont see the HBR unless you raise any issues with them.

squishypengu

Thank you for the advice! So do we then get the 2700 that was retained back in cash/ a lump sum of some sort?

saajan_12

squishypengu said:

I still don’t fully understand what the retention actually means - I get that they ‘hold back’ part of the mortgage but what does that mean for us? From some things I’ve read I’m not sure if it’s that a) we have to pay the 2700 as extra on top of our deposit or b) we have to pay to carry out the work and then get the money back from the bank once it’s complete?

order? I mean if there was anything else major wrong would this not have been flagged in the valuation? I’ve also read that the HBR or a survey can cause the bank to devalue the property further if it catches any other issues - could this happen?

Sorry for the stupid questions but any advice would be greatly appreciated!

Yes, they would hold back £2,700 from the mortgage proceeds instead of transferring it all at completion. Since you still need to pay the full purchase price, you can either
a) ask the vendors do to the work before completion (possibly at your own cost, possibly after exchange, dependent on how intrusive it is and how willing the vendors are)
b) pay an extra £2,700 with your deposit (non mortgage funds) on/before completion. This would later be reimbursed by the lender. 
c) agree a retention with the vendor, so you keep back £2,700 for a limited time, pending certain works to be completed and satisfactory survey. Speak to your solicitors. 

squishypengu

Okay, so we will need to cover the £2700 as extra with our deposit and then also pay for the work to be done? But then the £2700 will be refunded?