Mortgage retention

Seanj123

Just trying to figure out how a retention works, purchase price of 190k deposit 29k. Retention of 8k. So now have to put 37k in. I plan to complete the works myself, rather than use the company who quoted. And then not ask for the retention back from the lender. Would that go down as a bigger deposit and my loan amount smaller or will my loan still stand and 161k and the lender insist I have the work carried out from the quoted company and the then give me the 8k retention. 

kingstreet

You only pay interest on the funds you've actually borrowed. If you don't draw down the retention funds you will simply have a smaller mortgage. If you choose not to requested the retained funds, the lender is unlikely to request any further evidence the repairs have been done.

nicmyles

That isn't always the case (about them not requesting further evidence). In my first flat there was a retention of £2k due to some windows in slight disrepair. We didn't see the repairs as a priority so made up the difference and ignored the retention. However, we were unable to move to a new fixed rate with our lender until we had evidenced the repairs, meaning a reversion to the very unfavourable standard variable rate on the mortgage.

(and in the end, although we replaced the windows, we were unable to evidence the repairs to their satisfaction* and we had to remortgage with a different lender)

So even if you don't want/need the retained funds, can still have an impact down the line.

*they would not accept simple FENSA guarantee on the windows and demanded a specialist damp guarantee of a kind which did not appear to exist, as we could not find any installer who had heard of it or could give us one - the lender was unable to advise of a supplier who could do so but still insisted on it)