Mortgage retention

Seanj123

Can somebody please explain how retentions work please. 

Price of 192500 deposit 29000
Retention of 7000

1. if I get the house price reduced by 7000 would that allow the mortgage offer to proceed without a retention.

2. we split the rent the retention and carry on with 3500 retention as asking price lowered.

3. we ask for the works to be completed asap by vendor 

4. we withdraw our offer

any help please 

theartfullodger

Retention of that amount from your mortgage until you do the specified work.  What was specified?

As an investor in various lenders I'm pleased they protect their and my interests by using these.

Surely this was explained in the paperwork/offer documentation?

When work done to lender's satisfaction they release the money to you.

Had it years ago on a house which needed dry rot sorting, kitchen and central heating.

eddddy

Seanj123 said:

Can somebody please explain how retentions work please. 

Price of 192500 deposit 29000
Retention of 7000

To be honest, it's a complicated calculation.

It looks like you are borrowing £163.5K on an 85% LTV mortgage product.

So as it stands, you'd need the following in cash...  £29k deposit + £7k to temporarily cover the retention + money to do the repairs.

Seanj123 said:

1. if I get the house price reduced by 7000 would that allow the mortgage offer to proceed without a retention.

If you reduce the purchase price by £7k to £185.5K - I suspect you'll still only be able to borrow 85% of the purchase price, so that's £157.6K. And I suspect the lender will still want a £7k retention.

So you'd now need the following in cash...  £27.9k deposit + £7k to temporarily cover the retention + money to do the repairs.

Seanj123 said:

2. we split the rent the retention and carry on with 3500 retention as asking price lowered.

As above, if the asking price is reduced, your mortgage offer will be reduced, and the lender will probably still want a £7k retention. 

Seanj123 said:

3. we ask for the works to be completed asap by vendor 

If the lender does the work (to the satisfaction of the mortgage lender) before completion, then there should be no need for a retention at all.


But...

I suspect the problem is that you only have £29k in cash - so options 1 and 2 won't work for you.

So maybe you can ask your lender and solicitor and seller if they would be happy with this...

• A price reduction to cover the cost of the work, and in addition...

• The mortgage lender does a retention of £7k from your mortgage loan

• So you do a retention of £7k from the money you pay the seller

• When the work is done, and the mortgage lender hands over the final £7k - you give that £7k to the seller

But you'll still have to find the cash to pay for the work to be done. 

FreeBear

Seanj123 said:  3. we ask for the works to be completed asap by vendor

If you ask the vendor to do the work, they will (probably) do the cheapest & quickest job possible and may not be to a satisfactory standard.  Any guarantee would be in their name and may not be transferable.
Do the work yourself, and it gets done to a standard that you are happy with, and the guarantee is in your name should you need it. That said, if this is for damp "treatment", be aware that many of the companies operating in this field often go bust on a frequent basis, so the guarantee is worthless - Even if it is insurance backed, there are so many exclusion clauses, it isn't worth the paper it is written on.