Retention refers to holding back a portion of the agreed mortgage until any repairs the property requires are completed to the satisfaction of the lender. Retention is not very common, but it tends to occur when the property the buyer wishes to purchase has some issues that come to light in the survey. Those issues may be enough to bring down the value of the property.
For example, let’s assume a property is worth £300,000. You agree to provide a 10% deposit of £30,000 and the mortgage is agreed for £270,000. However, upon inspection by a surveyor, notable issues come to light that reduce its worth to £250,000. This means that while the mortgage is agreed for £270,000 the lender may only agree to release £250,000 and to retain the final £20,000 until the work that was highlighted is completed. They will typically put a deadline on this work, so you must make sure you can meet that deadline.
The two issues that arise from this scenario are that you’d need to find the extra cash to be able to buy the property with the smaller mortgage amount initially granted. You would also need to find the funds to resolve whatever issues there are with the property. As such, there are instances where would-be buyers withdraw from a property sale for financial reasons. Even if they have the cash, they may decide they do not want to move into a property that requires significant work on it at that stage.