Are you looking to buy a property at auction and need a mortgage to suit your requirements?

Buying a property at auction can see you grab a real bargain. First, however, it’s vital to have all the information about the property to hand and your finances organised before you start your bidding. 

If you’re looking for a mortgage advisor in Chester to help support you in securing a mortgage for your auction property, make sure to check out our site and our Find an Adviser tool to help you further. 

Buying a house at auction 

If you’re looking at buying a house at auction, it’s important to note that you must be in a position to complete it within 28 days, or you will be at risk of losing your deposit. 

A deposit of typically 10% will be required on the day you bid, so it’s vital that you have these funds immediately available. 

As well as the deposit, you will also need to ensure that you have the funds available for any remedial work that needs to be carried out on the property. 

There are two types of auction sales: 

Unconditional – a 10% deposit is required on the day, with the remaining amount due to be paid within 20 working days.  If you fail to pay, you will forfeit your deposit, and you could also be expected to pay the cost for the resale of the property. 

Conditional – this is the better option when securing mortgage finance as the timescales are a little longer. For example, once the sale has been agreed upon, you have 20 working days to sort out all of your paperwork and finances. From here, you then have a further 20 days to complete. 

Before you start your bidding… 

Head to a property auction so you can get a feel for what they are like and to see just how they work. It’s important to understand how bidding works and what properties you will find available at auction. 

You also need to go and view the property you intend to buy; comparing the property to others in the area that have recently sold will help determine what you think is the true value of the property and provide clarity in terms of how much you want to bid for it. 

You must organise valuations and surveys of the property in advance of the sale wherever possible, so you know what works need to be carried out and the current state of the property. 

Legal packs should be available for all properties at auction, and it’s recommended that these are passed to your solicitor to check over before the auction gets underway.  The legal pack will contain vital documents such as title deeds, any special conditions of the sale, searches, leases, and any other legal issues of which buyers should be aware. 

Now, it’s time to work with your mortgage broker to find the most suitable mortgage for you. 

Ideally, securing a mortgage before the auction can place you in a more stable position; however, a mortgage in principle with a mortgage application ready to submit will also work. 

Can you get a mortgage on an auction property? 

Most lenders will only provide you with a mortgage in principle if the property you are looking to purchase is in a liveable or immediately habitable condition. 

You will also not be able to purchase an unmortgageable property if you need to secure mortgage finance. 

Some lenders also won’t agree on a mortgage if the property in question is in too bad condition.  So, if you’re looking for a big renovation project, you might have to look at other finance options.  However, once the state of the property has been improved, you might then be able to apply for a mortgage. 

Securing a mortgage before the auction  

If you require a mortgage for your auction property, it’s essential that you secure a mortgage in principle, showing that a particular lender has agreed to borrow you the set amount of money. 

To secure your mortgage in principle, you will have to provide proof of income, helping to determine affordability criteria. 

Note:  Lenders will only lend you the agreed amount based on the property’s value – if your bid goes over this price, you will be responsible for paying the difference. 

You will also have to bear in mind that you will have additional fees, such as surveys, valuation fees, deposits, legal costs, etc. 

A mortgage can take anywhere from 3 to 6 weeks to secure, so you must build these timescales into your planning criteria. 

At Mortgage Assistant, we don’t recommend that you bid on a property that you’ve never physically seen or a property that appears to be a real steal; there’s more than likely a reason why no one else is bidding on it. 

It’s also important that you know your highest bid and you stick to it!  Getting into a bidding war only pushes the price up – you must be prepared to walk away. 

You should also never assume that you’ll be able to secure a mortgage once you have bid on a property.   

For honest, upfront mortgage advice, use our Find an Advisor tool today to find the best mortgages Chester has to offer. 

Remember, when buying a property at auction, having your finances and plans in place beforehand is key, as you will typically only have a few weeks from the auction catalogue being released to the auction being held. 

An overall quicker process, buying a property at auction comes with fewer costs and can be a great way to find unique properties with excellent potential. 

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