Please can someone explain mortgage retention please?

[Greencheese]

The simpler the better!

For ease I've rounded up the figures.

We are buying a house for £235 so that's £30k deposit so borrowing £205k.

It needs structural work so I'm expecting a 5k mortgage retention.

We have the money to do the work, that's no problem.

This is where I'm a bit confused.

I know they will then 'hold back' 5k till we get the work done, so we can only borrow £200k .

BUT. The 'held back' 5k where does that go while we get the work done? Do we pay that the bank till they 'release it' so for a few months we effectively put down 35k deposit till we get the 5k retention back?

I hope I've explained myself right!

Thanks.

Hi, not an expert, but we had money retained on our first mortgage.

So yes effectively you pay a bigger deposit and the bank only lends what the property is worth before the work is done.

On ours we would have to have the work done and provide receipts to the bank to release the rest of the funds. This would then increase the amount borrowed and the monthly payment.

In fact we never got round to doing the DPC before we remortgaged and never got the money retained paid out.

So we just paid a bigger deposit in effect and less mortgage.

If you can afford the additional deposit and to do the work as well it would probably be better for you in the long term to not claim the retained amount and get charged the interest.

Thanks! Ahhhh right ok, so we could do the work and then see where we are at as to if we 'want our 5k back' sort of thing. If after the structural work we actually have enough we can simply leave the retainer as it is and have a cheaper mortgage.

Have I got that right?

We had a retention of 25k (I think). This meant we needed an extra 25k towards the deposit and then extra money to do the work. Once the work was completed we had to send a receipt from the builder and a letter from the structural engineer to say the work had been completed.

The bank then released the final 25k of the mortgage. This also meant that initially the morgage payments were less and after the retention was released went up. I'd not realised that would happen. It's a difference of about £40 so not earth shattering.

How did they work out how much to retain? Was it simply the cost of the quotes you sent all added up?

Yes it linked to quotes we had for a re-roof and damp work made by the surveyor. Some of the work ended up being cheaper so I was worried they might not pay out as we hadn't paid enough. However, they were happy with just receiving a receipt/invoice to say it had been done.

Thanks karron that's exactly what I'm worried about, we sent the quotes to the mortgage company but since then I've found a cheaper quote. So hopefully they just want it signed off then we can have our money back ha.