Retainer on house that requires work

E

Epstein

Guest
I'm hoping somebody else has had experience of this.

I have gone sale agreed on house that requires some work (needs floors, kitchen, bathroom but plumbing and electrics were done in recent times).

My loan offer letter came through and one of the conditions attached is that they will initially give me 85% of the purchase price with remainder to be drawn down once full works are completed.

My concern is that the vendor will not accept anything but full amount of purchase price for house up front as his bank are putting a lot of pressure on him to sort out his finances.

I could cover the shortfall from my savings, but would my lender then reimburse me as soon as work has been completed?

I'm terrified that the vendor will get spooked if he doesn't get full amount, and he does have other interested parties!

Any advice would be greatly appreciated.
 
The vendor will have to get the full amount wherever you get it, I should imagine paying it from your savings is the obvious answer. What percentage of purchase price is the loan offer for? It is normal for lender to hold back retention to ensure necessary work is done and there is no reason to believe it won't be released when you do the work.
 
The bank are giving me 85% of purchase price initially, the remainder to be drawn down when full works completed.

So you're saying it is possible that the bank will reimburse me when the time comes if I cover the shortfall? Somebody has suggested to me that the bank will pay no money direct into my personal account, if I'm getting a mortgage all the money borrowed has to go from lender to vendor, not sure if this is accurate?
 
Epstein said:
The bank are giving me 85% of purchase price initially, the remainder to be drawn down when full works completed.

So you're saying it is possible that the bank will reimburse me when the time comes if I cover the shortfall? Somebody has suggested to me that the bank will pay no money direct into my personal account, if I'm getting a mortgage all the money borrowed has to go from lender to vendor, not sure if this is accurate?
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Money goes to solicitor, not directly to the vendor. I'd guess they will give two different drawn down cheques, one for 85%, the other for 15%.
 
That would 100% though, they are giving you 85% of purchase price initially, what is the balance? Are you borrowing 90%/92%? It doesn't really matter anyway, the bank will issue the funds for the balance of the loan when the works are done to your solicitor, the vendor will have been fully paid at that stage (from initial drawdown and your savings) so the solicitor will give you the balance.
 
I did something similar when I bought my first house in the late 90's.

The bank allowed me to draw down 90% of the purchase price and I funded the finishing myself (central heating, etc) and then the property was revalued and the bank allowed a further top-up up to 90% of the new valuation.

The risk was that the revaluation figure would not be high enough to cover the necessary new mortgage figure. I'd imagine that would be a big risk at the moment.

I can't see the bank issuing the "top-up" amount to your solicitor until the works are done and they have a new valuation and the solicitor requests the second amount.
 
As has been stated, there is no way that the vendor will allow you to complete the sale without the full purchase price. You could just disappear and not pay the rest.
You cant walk into a shop and pay 980% of the price, take the goods and agree to pay the rest in a few months time.

I dont understand why you are not sure that the mortgage company will pay the rest of the money once the works are complete - will the contract say that they have to ?

Can your solicitor explain the details of the mortgage contract to you and what exact conditions the mortgage company need you to meet in order to get the final drawdown,
 
Thanks to all who have replied!

Just to clarify I'm not concerned that the bank will not allow drawdown of retainer, I just wasn't sure if the bank would reimburse me personally if I covered the short fall. As I said previously, a friend had suggested that the lender will only give money to the vendors solicitor for purchase of house.

The replies posted here seem to suggest that this shouldn't be an issue...I hope!
 
Epstein said:
Thanks to all who have replied!

Just to clarify I'm not concerned that the bank will not allow drawdown of retainer, I just wasn't sure if the bank would reimburse me personally if I covered the short fall. As I said previously, a friend had suggested that the lender will only give money to the vendors solicitor for purchase of house.

The replies posted here seem to suggest that this shouldn't be an issue...I hope!
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I see your confusion, but you have no choice but to fund the shortfall until the remedial works are done.

Confirm this with your solicitor
 
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