Remote valuations

Retentions

We’ve introduced remote valuations across a number of our product options. As a result, we have introduced temporary lending modifications. One temporary modification is the introduction of retentions, which apply to the following product options:

• Capital Select Options

• Interest Select Options

• Over 55 Buy-to-Let Options

• Second Home Options

Please visit our Coronavirus Support Hub to find out more about the other temporary modifications which have been introduced.

When is a retention applied?A retention will be applied to all cases on the above product options, if a remote valuation is conducted.

The retention applied will be 10% of the total loan amount, subject to a minimum of £5,000.

If your customer does not want to proceed with a retention, the case will need to be placed on hold until an on-site valuation can be conducted.

How does the retention work?The retention will be applied in different ways, depending on how the customer is accessing their money:

• If the customer has applied for an initial advance, with no cash reserve facility

• If the customer has applied for an initial advance and a cash reserve facility, and the cash reserve facility is greater than the retention

• If the customer has applied for an initial advance and a cash reserve facility, but the retention is greater than the cash reserve facility

If a retention has been applied and your customer has a cash reserve facility in place, an onsite valuation will be required before any of the cash reserve facility can be accessed.

The full details of your customer’s retention will be detailed in Section 17 of their Offer Letter.

When will the retention be released?We’re now able to instruct onsite valuations in England, Scotland and Wales across all product lines.

The onsite valuation:

• Needs to be completed within 6 months of completion

• Is free of charge

The retention will be released to the customer when we receive a satisfactory onsite valuation report.

The retention will be reduced or withheld where:

• The onsite valuation identifies the need for essential repairs to the property

• The onsite valuation confirms the property value has fallen since the remote valuation was conducted

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Worked examplesWe’ve developed some worked examples to explain our approach to retentions, which outline the scenarios overleaf.

Worked examples of where a retention has been applied:

Meet Thomas• He is 62

• He owns a 3 bedroom semi-detached property in Leeds valued at £280,000

• He wants £40,000 to pay-off an interest-only mortgage and £10,000 to fit a new kitchen

• He intends to make voluntary repayments until he retires in 2025

1. The customer has applied for an initial advance, with no cash reserve facility

Thomas’ financial adviser has recommended Canada Life’s Capital Select Super Lite product, and submits an application.

Canada Life instruct a remote valuation which confirms the property value is £280,000.

Canada Life issue an Offer, which has a 10% retention applied (£5,000). This means that Thomas:

• Will receive £45,000 upon completion of the mortgage

• Will receive the remaining £5,000 retention when the satisfactory onsite valuation has been completed

• Only accrues interest on the £45,000 he has received

The post-completion valuation is undertaken five months after completion, and:

• Confirms the property is in good repair

• Confirms the property is valued at £280,000

Therefore the retention amount of £5,000 is released to Thomas and the full amount accrues interest.

Retention Remote Evaluations | 3

Meet Sylvia and Reg• Sylvia is 72 years old and Reg is 74 years old

• They own a 4 bedroom detached property in St Albans valued at £500,000

• They want £55,000 to pay-off existing debt

• They also want a cash reserve facility of £100,000 to gift to two grandchildren when they turn 18 in two and four years’ time respectively, to pay for a new kitchen and new bathroom and to travel over the next 5 to 10 years

• They want the option to make voluntary payments

2. The customer has applied for an initial advance and a cash reserve facility. The cash reserve facility is greater than the retention

Their financial adviser recommends a Canada Life Capital Select Lite (Flexible) product, and they submit an application.

Canada Life instruct a remote valuation which confirms the property value is £500,000.

Canada Life issue an Offer for an initial advance of £55,000 and a cash reserve facility of £100,000. The Offer has a 10% retention applied (£15,500).

Because the amount in the cash reserve facility is greater than the retention amount, the retention is applied to the cash reserve facility.

This means that Sylvia and Reg receive the initial advance of £55,000 in full, upon completion.

The cash reserve facility has a retention of £15,500, however none of the cash reserve facility is available on the day of completion. This is because an onsite valuation is required before it can be released.

The post-completion onsite valuation is conducted four months after completion, and confirms the property is in good repair and valued at £500,000. The full cash reserve facility of £100,000 is then available for Sylvia and Reg to access.

Worked examples

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Meet Louise

3. The customer has applied for an initial advance and a cash reserve facility. The retention is greater than the cash reserve facility

Her financial adviser recommends a Canada Life Capital Select Super Lite (Flexible) product, and she applies.

Canada Life instruct a remote valuation which confirms the property value of £100,000.

Canada Life issue an Offer for an initial advance of £12,000 and a cash reserve facility of £4,000. The Offer has a retention applied. The minimum retention amount of £5,000 is applied, because 10% of the loan amount is £1,600. The retention will apply to the total cash reserve facility (£4,000) and to some of the initial advance (£1,000).

This means that Louise receives:• £11,000 upon completion

The post-completion valuation is undertaken four months after completion, and confirms the property is in good repair and valued at £100,000. This means that Louise:

• Receives the remaining £1,000 of her initial advance

• Can access her cash reserve facility of £4,000

• She is 78 years old

• She owns a 2 bedroom terraced property in Lancaster valued at £100,000

• She wants an initial advance of £12,000 to get a new roof on her property and to gift £2,000 to her grandson when he graduates from university next spring

• She wants £4,000 in a cash reserve facility to replace the bathroom in a couple of years’ time

• She wants to be able to make voluntary payments using her widow’s pension

Worked examples

Retention Remote Evaluations | 5

Worked examples of where the retention has been reduced or withheld:

4. The post-completion valuation identifies the need for essential repairs to the property

Robert applied for a Canada Life Interest Select Gold product. He wanted an initial advance of £150,000 to cover various costs over the coming 6-12 months, including home improvements, gifts to family and the purchase of a new car. A 10% retention was applied, so he received £135,000 upon completion of his mortgage.

The onsite valuation was conducted five months after completion, and confirmed the property valuation was £550,000. This is the same valuation figure provided by the remote valuation. The onsite valuation did, however, highlight damp problems affecting the main bedroom.

Canada Life requested that essential repairs be completed to remedy the damp problems. The retention could not be released before this issue was remedied.

Robert arranged for a local builder to complete the required works, which cost £3,000. Once completed, Canada Life released the £15,000 retention to him, and Robert was able to pay the builder using the retention money which he received.

Meet Robert

Meet Christine

5. The post-completion valuation confirms the property value has fallen since the remote valuation

Christine applied for a Canada Life Second Home Lifestyle product. She wanted an initial advance of £100,000 to cover her expected expenditure over the coming 6-12 months, but she did not need it all upfront. She received £90,000 upon completion with £10,000 held on retention.

The post-completion onsite valuation conducted three months after completion confirmed the property was lower than confirmed in the remote valuation. The remote valuation value confirmed a property value of £400,000, but the onsite valuation confirmed a property value of £390,000.

Canada Life had to update their records to reflect the onsite valuation figure. Therefore, they released £7,500 to Christine. £2,500 was permanently withheld, reflecting the 2.5% fall in the property valuation.

Worked examples

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Telephone calls may be recorded for training and quality monitoring purposes. Stonehaven UK Limited, trading as Canada Life, is a subsidiary of The Canada Life Group (U.K.) Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registered number: 05487702. Registered office: 6th Floor, 110 Cannon Street, London, EC4N 6EU.

Contact usTo talk a case through with our underwritersEmail: hf-underwriting@canadalife.co.uk