Updated: January 06, 2022

A Guide To Mortgage Retentions When Buying a House

Is your lender insisting on a mortgage retention? Find out what this is and your options going forward in our in-depth guide to retention on a mortgage.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: January 06, 2022

Getting a mortgage can throw up a few roadblocks along the way. One of the least common problems you might face, but a difficult one if it ever occurs, is when a lender implements a retention on a portion of the loan amount you need to borrow.

This guide will tell you everything you need to know about mortgage retention; how it works, why lenders do it and who to turn to for guidance should it happen.

What is mortgage retention?

Simply put, mortgage retention is when the lender doesn’t give you the full amount of the agreed mortgage balance straight away. The lender holds on to a certain amount for a period of time – usually until certain works to the property have been carried out.

It’s not an everyday occurrence for lenders to retain part of a mortgage. They will only do this if a surveyor has identified certain work that needs to be carried out before the property is worth the value you have paid for it.

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How does mortgage retention work?

When you buy a property, surveyors will carry out a valuation to see how much they think the property is worth and if it matches the asking price. This helps your mortgage provider decide how much they will lend you.

Lenders may agree to a certain value before the survey, but can then decide to retain a certain amount after seeing the results of the survey. This is most likely to happen if they spot some essential works that need to be dealt with.

For example: Your lender agrees to give you a £200,000 mortgage. However, they spot a damp problem, so decide to only give you £190,000 straight away. The remaining £10,000 is the amount they are retaining.

This £10,000 will remain with the lender until you’ve carried out the necessary work to fix the damp problem. The lender may well set a deadline for the works to be completed – normally within 6 months of you moving in.

Once you’ve done this work and the lender is satisfied – the final £10,000 will be released to you.

The reasons a lender will do this

There’s a number of reasons a lender may decide to retain all or part of your mortgage. Usually it’s because there are some vital and important works your lender wants you to get done before they are comfortable loaning you the full mortgage amount.

These works are normally deemed essential repairs. This can be anything that might affect the safety or security of the property.

This could include:

  • electrical repairs
  • plumbing issues
  • structural damage

One of the most common reasons part of your mortgage might be retained is due to a damp and/or mould problem. Due to the climate, a lot of homes in the UK have this issue. The severity of these problems and the amount of work required to fix them varies hugely.

Other issues leading to mortgage retention could also include:

  • asbestos removal
  • roof repairs
  • boiler repairs

The amount of mortgage your lender will retain depends on these factors. You may need to get additional valuations and surveys completed to establish this.

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Different levels of mortgage retention

Lenders won’t always retain the same percentage of a mortgage. The level will depend on the severity of the problem and the amount of work required to fix it.

For some issues it may be a relatively small amount – say 5% to 10% of the mortgage.

What is 100% mortgage retention?

This is where your lender retains the full amount of your mortgage for a certain period of time. They usually make this decision following a recommendation from a surveyor.

A lender will probably only retain 100% of your mortgage if there is a really serious problem that needs to be fixed or if the property is essentially uninhabitable in its current state. It is not very common for a lender to retain 100% of your mortgage, so don’t panic.

One way to protect yourself from this is to get a full structural survey before you complete on your purchase. This is particularly useful if you’re buying an old or repurposed construction property. This survey should highlight any potential problems that a regular valuation might not pick up on.

Which lenders retain mortgages?

Not all lenders retain mortgage borrowing. Some are also willing to overlook small mortgage retention suggestions – usually for amounts less than £2,000. At the time of writing, these lenders include: Metro Bank, NatWest, Bank of Ireland, Barclays, and Nationwide.

Lenders that will implement full mortgage retention, regardless of the amount include: TSB, Virgin Money, Clydesdale Bank, and Bluestone Mortgages.

If you’re concerned the property you’re buying may have some structural issues which may result in a retention of part of the loan you need, speak to an experienced mortgage broker. They’ll know which lenders are best to approach in these circumstances.

What are the financial implications of mortgage retention?

Worst case scenario; to enable completion of the transaction you will have to come up with the shortfall if your lender decides to retain part or all of your mortgage, as well as finding the money to complete the repairs needed on your property.

If you’re faced with mortgage retention you may have to take out a loan or rely on your overdraft or a credit card. You may be able to avoid this if you can negotiate with the property seller.

As soon as the remaining mortgage is released, you should be able to quickly repay any finance. Be careful though. You may face early repayment charges (ERC) if you opt for a loan.

How a broker can help

If you find yourself in this situation and are not sure what your options are, or what the most financially viable solution to your problem is, a broker can help you.

Speaking to a broker can help you better understand your options and work out the right way forward. They can also put you in touch with lenders that may offer you a different deal or be able to negotiate a better mortgage retention deal for you.

If you’re worried about mortgage retention or concerned about what your options might be, get in touch with us.

We work with a team of experienced brokers, some of these experts specialise in situations just like this. They can give you clear advice if you’ve been offered a mortgage on 100% retention and help you find the best solution.

Make an enquiry or give us a call on 0808 189 0463 for a free, no obligation consultation.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

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FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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