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Understanding Retention Clauses on a Mortgage Offer

What is a retention clause, what does it mean, and how closely do you need to follow the agreements included within a proposed mortgage offer?

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-06-15
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Mortgage Reteniton Clauses Explained

If you have been approved for a mortgage, but the offer has a retention clause, it's essential to understand what that means and whether you can proceed!

In this guide, the Revolution Brokers team summarises what retention clauses mean and how they work.

For help with understanding your mortgage offer, or to find more suitable borrowing, give us a call on 0330 304 3040, or send an email to [email protected].

What is a Mortgage Retention Clause?

In short, retention means that the lender is holding back some of the funds. They will release those funds when specific work has been completed.

Most of the time, the survey has identified some essential works required to ensure the property matches the valuation figure.

The mortgage retention survey follows the work's completion to verify that it has been carried out successfully.

Here is an example:

  • You apply for a mortgage of £198,000.
  • The lender makes an offer but with an £8,000 retention clause.
  • When electrical wiring has been completed to safety standards, they will release the £8,000 balance and set a six-month deadline.
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Why Has My Mortgage Offer Got a Retention Clause?

Most of the time, a retention clause relates to something such as wiring or perhaps damp. The retention value depends very much on how severe the problem is and how it impacts the property valuation.

Other common reasons include:

  • Faulty boiler.
  • Central heating repairs.
  • Leaking roof.
  • Asbestos issues.
  • Japanese Knotweed growth.
  • Structural defects.

Do I Have to Accept a Mortgage Offer with a Retention?

No, you don't. If you accept the retention, you will have a smaller mortgage than you applied for and will also need to find the cash to pay for the repair works.

Short-term borrowing can be expensive, so this isn't a decision to make lightly. You might even have a 100% retention mortgage, where the lender won't release any funds at all.

Usually, that means a full structural engineer's report is required.

In this scenario, you can negotiate with the seller or withdraw your application and apply elsewhere.

We would strongly recommend getting in touch with the Revolution Brokers team before making another application to determine which lenders are most able to help and whether it's worth considering a different type of home loan.

How Can I Resolve a Retention Clause on a Mortgage Offer?

The retention offer comes after the full mortgage assessment has been made, so you can choose to accept and complete the work or withdraw your application.

Your retention clause might offer to:

  • Release all of the funds, provided you commit to completing repair work within a particular deadline.
  • Transfer some of the funds, with the balance available when the works are complete.
  • Withhold all of the financing, pending a report from a structural engineer.

Expert Advice on Mortgage Retention Clauses

If you have a mortgage offer with a retention clause, the best action is to consult an independent, whole-of-market broker who can analyse the proposal and make professional recommendations about the best courses of action.

Give the mortgage advisors team a call on 0330 304 3040, or get in touch via email at [email protected], and we'll run through all the options with you.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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