Can you Get a Mortgage on an Auction Property?

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Buying a property at auction is much different than buying one in a more traditional sense. You have a much smaller timeframe to complete and you may find that the property needs a lot of work done to it. This can cause some problems in relation to your mortgage.

In this guide, we’ll discuss the process of getting a mortgage on an auction property and any problems you may face in doing so.

 

Key Points:

  • Mortgage lenders will not give you a mortgage for an auction property unless it is immediately ready to be lived in or be let out
  • The process of buying a house at auction is much quicker than with non-auction properties, meaning you may have to use a bridging loan if the lender cannot meet completion deadlines

Can you get a mortgage on an auction property?

Yes, you can get a mortgage on an auction property, but there are certain criteria that you must meet. 

The auction property must be in good condition before lenders will consider you. Good condition usually means the property has running water and a working heating system and is essentially somewhere you could move into straight away. If the property is not considered liveable, a mortgage provider may turn you down. 

Is it hard to get a mortgage on an auction property?

Getting a mortgage on an auction property is harder than getting a mortgage on a standard property for sale, and there are certain requirements that need to be met. 

There are a few factors that may prevent you from securing a mortgage on an auction house, such as:

  • No running water
  • No central heating 
  • No working bathroom or kitchen 
  • Japanese knotweed 
  • Wet or dry rot 

A good rule to abide by is to make sure the property is immediately liveable or ready to be let. It is recommended that you have the property surveyed to avoid any unexpected repair costs after purchasing.

How to get a mortgage for an auction property

Buying a property at auction is often quite a quick process, and the first thing that you’ll need to do is get an agreement in principle from a mortgage provider. This will give you a clear idea of what you can afford and will also act as proof that you’ll be able to purchase the property. 

A decision on how much you can borrow will be made by the mortgage lender based on your proof of income, affordability and credit checks. You will usually need to show the lender 3 months worth of payslips, 3 months worth of bank statements and valid ID and proof of address. 

Once you have secured the agreement in principle, you can then start to look at properties at auction. Keep in mind that lenders will only give you a mortgage for “mortgageable” properties. 

How can you secure a mortgage before going to an auction?

Getting the advice of an independent mortgage advisor can help you to find the right mortgage before you head to an auction. Our team at Barlow Irvin have years of experience helping buyers to get on the property ladder through auction. 

Getting a mortgage in principle, or an agreement in principle, will help the seller to know you are serious about buying the property, as well as showing how much you can afford to pay. 

Once you have all of this in place, you’ll know your limit when it comes to the bidding. If you have won the bid, your solicitor will work to complete with the seller in 28 days.

What happens if the mortgage lender can’t meet the completion deadline for an auction property?

There are two types of auction sales, and one will give you a little more time than the other. 

  • Unconditional auction sales – This is the traditional way of doing things. You put down a 10% deposit and pay the rest in 28 days, completing on the property within that time.
  • Conditional auction sale – A conditional auction sale gives you a little more time to have surveys done and sort your mortgage out. For 20 days, you will have an exclusive right to the property and no one else will be able to take it from you. After this time, you will have 20 days to complete in the same way a traditional auction would.

If your lender can’t meet the quick turnaround, you may want to take out a short term bridging loan to cover the costs until your mortgage is arranged. A bridging loan can take up to 10 days to complete, which is usually quicker than obtaining a mortgage. This bridging loan will help to protect your 10% deposit.

About the author 

The Barlow Irvin Team

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