Many homebuyers are attracted to properties that need updating or renovation. These fixer-uppers often cost less and give you the chance to create your perfect home.
If you've found a property like this and have made an offer, there's one important thing you need to know about - mortgage retention.
Not heard of it? That's where we can help. In this blog, we'll explain what mortgage retention is and what to do if it affects your home purchase.
To get a mortgage, your lender will carry out a valuation report. This is a basic check to make sure the property is worth what you're paying for it. There are several other surveys you can pay for that will look more closely at the structure of the property, but the valuation report is one you must pay for.
This report tells your mortgage provider whether the property you're buying is worth what you're paying for it. It's important to your lender that you're not paying too much, because if you couldn't keep up with your mortgage payments and they had to take back the house, they would lose money if they couldn't sell it for what you owe them.
A mortgage valuation report doesn't go into much detail, so as a homebuyer it's worth getting another survey like a condition report, homebuyer’s report or a building survey. These will give you a much better picture of the condition of the property and any work that needs doing.
But sometimes even a basic valuation report can spot a serious problem with a property. So, what happens then?
Sometimes the valuation report flags up an issue that your mortgage provider thinks you should look at. However, that issue could worry the lender so much that it decides to hold back some of the money it has agreed to lend you – and this is known as mortgage retention.
You find a house you love and put in a successful offer of £250,000. You have a deposit of £50,000 and need a mortgage of £200,000.
But after the valuation report, your lender spots problems. They say the property needs a new roof and has damp issues.
Instead of giving you the full £200,000 mortgage, they only give you £180,000. They keep back £20,000 until you fix these problems.
Most lenders give you about six months to complete the work before they'll release this money.
Unfortunately, you will need to find an extra £20,000 if you want to buy the house. You could try making a lower offer after finding out about these problems, but the lender can simply reduce the money they give you to match this. If you negotiate a lower price of £230,000, the lender may still retain £20,000, offering you only £160,000 instead of £180,000.
A better plan is to talk to the sellers and ask them to do the work before you exchange contracts. If they agree, you can ask your lender to do a second valuation report to check the work has been done, and they may then agree to give you all the money.
This helps you because you won't have to find the extra cash, and it helps the sellers because there's less chance of the sale falling through.
❗But you should think carefully about whether you still want to buy the property at all. If the problems are serious and expensive to fix, you might prefer to look for a home that's in better condition.
If you don't want to walk away from the property and the seller won't fix the problems before you exchange, your only option is to find the extra money yourself. Remember, this will be on top of all your other moving costs, including the deposit you've already saved, the Stamp Duty Land Tax, your legal fees and the cost of moving your belongings.
Be aware that as well as needing to find the money your mortgage lender has held back, you'll also need to pay for the work they want done. Typically, a mortgage provider will keep the money for six months and give it to you once you can prove you've had the work done. If you miss this deadline, you won't get the extra money.
💡Get quotes from at least three local tradespeople for the work that's needed. This way you can find the best price.
You don't actually have to claim the retained funds, meaning your mortgage loan will be smaller, which could help you pay it off sooner.
If your lender tells you they want to hold back some of your mortgage money, you have four main options:
Buying a new build property doesn't mean you'll escape mortgage retention issues. In fact, new builds often face their own special retention challenges:
If you're buying a new build, ask your solicitor to check if there might be any retention issues before you sign anything.
Once you've fixed the problems your lender is worried about, you need to follow these steps to get your retention money released:
Most lenders will release the retention money within 2-4 weeks after they're happy with the work. If you don't hear back within a month, call them to chase it up.
A more recent reason lenders might hold back money is if your home has poor energy efficiency. Since the new energy rules came in, lenders are more worried about homes with low Energy Performance Certificate (EPC) ratings.
You might face retention if:
With rising energy costs and stricter efficiency regulations, lenders worry that poorly insulated homes may be more expensive to run, making them a riskier investment. They may withhold funds until essential upgrades—such as better insulation, energy-efficient heating, or double glazing—are completed.
The good news is some lenders now offer special "green mortgages" that include extra money to help you make these improvements.
Since the FCA's new Consumer Duty rules came into force, lenders must now:
If your lender isn't being clear about any of these things, you can make a formal complaint and they must respond within eight weeks.
We hope we've helped make mortgage retention easier to understand so that if it affects your house purchase, you know what choices you have.
❗Remember to always consider getting a detailed survey beyond the basic mortgage valuation to spot any potential problems early in the buying process.
Disclaimer: We make every effort to ensure content is correct when published. Information on this website doesn't constitute financial advice, and we aren't responsible for the content of any external sites.
Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.
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