A “mortgage retention” occurs when a lender approves a mortgage deal, but won’t release all the funds straight away. Instead, the lender keeps some of the money until certain conditions are met.
This is most commonly offered when a lender’s valuation survey discovers structural faults.
To complete the purchase, the buyer would need to find another way to access the money being retained.
While it might sound bad, a mortgage retention isn’t the end of the world. It can even be used as a powerful bargaining tool – you can use it to help renegotiate the price with the seller. However, remember that if the seller refuses to negotiate, and you want to buy the property anyway, then you’ll have to make up the shortfall yourself. If you can’t renegotiate the price or afford to spend the extra cash, then you’ll simply have to look elsewhere.
You could also try to persuade the prospective mortgage lender that you’re serious about correcting any faults the property in question has. You could show evidence of quotes you’ve gathered from the professionals you would commission. This option is likely to be long-winded, but if your heart is set on a specific property, it could be worth pursuing. If it doesn’t fully convince the lender to remove the retention, it might result in a reduction in the amount of the retention.
So four options to consider are: renegotiate the sale price, make up the shortfall yourself somehow, walk away, or make a detailed case to your prospective lender.
Before offering you a mortgage, lenders will put your property through a valuation survey. This is to ensure the loan is being secured against something of equal value.
In some cases, the valuation survey will suggest you’re overpaying for the property, and you’ll be offered a mortgage for less than the selling price.
In other situations, the surveyors will suggest that the property could be worth the selling price if essential repairs take place. It’s in this case that a lender may want to put a mortgage retention in place.
The amount retained will be based on how much value the work would add to the property. For example, if the surveyor suggests that fixing a leaky roof would add £5,000 to a property’s value, the lender could offer a mortgage with a £5,000 retention that’ll be unlocked once the roof is repaired.
You can’t complete a property purchase until you come up with 100% of the selling price. If you don’t have the retained funds lying around in your savings, you’ll need an alternative solution. Here are some options that could allow you to complete the purchase:
If you’re unable to work out a solution in time, there’s a good chance you could lose the property to another buyer.
| Response | |
|---|---|
| No | 46.61% |
| Yes | 29.26% |
| Not sure | 24.13% |
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