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Can You Get a Mortgage on an Auction Property?

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Buying a property at an auction can be a great way to bag a bargain property. But can you get a mortgage on an auction property?

In short, you can but there are no guarantees and it’s important to do your homework first. It’s also important to understand the process of buying a property at auction and the risks that come with using a mortgage to buy a property this way.

How to get a mortgage

To get the best idea of your mortgage options and what mortgage is right for you it’s always worth speaking to a mortgage adviser. They will understand your circumstances and look across the mortgage options most suitable to you.

Our preferred mortgage adviser offers fee-free advice in 24 hours and a decision on your mortgage in 5 days from submission of your mortgage application. Or they will pay you £100!

Your home may be repossessed if you do not keep up repayments on your mortgage. Terms and conditions apply to their mortgage decision promise.

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How do property auctions work?

Property auctions mean bidding against rival buyers to have your offer on a property accepted.

‘Traditional’ auctions have very strict rules. The winning bidder will need to pay a 10% deposit straight away and then complete the purchase in the next 20 working days. Therefore, mortgages are a lot less likely to buy at this type of auction.

In an online property auction buyers, also know as the ‘modern method of auction’ buyers have a grace period of 28 days to get all their paperwork done before they are required to put down a deposit and make a legal commitment to buy the property.

This gives the buyer a longer period to complete a survey on the property and get their finances sorted out.

If you buy with a mortgage, you’ll need to be confident you can get a mortgage offer, as well as all the conveyancing done, within the respective timeframes.

Failing to complete on time could also result in you losing your 10% deposit and you could also be held liable for the costs of re-selling the property.

Can I buy a property at auction with a mortgage?

Some people bid at auctions with a mortgage in principle in place then proceed to a full mortgage application if they win the bidding. This can be risky as any delays in the mortgage process could mean failing to complete on time.

Other buyers could get a mortgage offer on a particular property before the auction. To do this, you’ll need to pay the lender for a mortgage valuation. This can be risky too as you’ll have wasted this money if you don’t win the auction.

Either way, you might also run into problems if you ended up bidding more than the agreed mortgage amount. So you will need to consider how you plug the shortfall?

If you buy at auction, you should also get a solicitor to read the legal pack before you bid on a property. It’s advisable to get a survey done too.

Always discuss you mortgage options with an mortgage adviser to find out what options are available to you.

Your home may be repossessed if you do not keep up repayments on your mortgage. Terms and conditions apply to their mortgage decision promise.

Mortgage Quotes

Alternatives to using a mortgage to buy a property at auction?

Some mortgage lenders won’t lend on certain types of property. This can include those deemed ‘uninhabitable’ and leasehold properties with short leases. These properties might be labelled “cash buyers only”.

A lot of buyers at auctions use bridging finance. These loans can be arranged quicker than a mortgage and have less strict criteria when it comes to the property. However, you’ll need another asset or property as security for any bridging loan.

Another way to buy at auction is with cash – then you won’t need to worry about finance at all.

How do online property auctions work?

Some estate agents sell properties via online auctions or the ‘modern method of auction’. This type of auction offers a longer completion timescale than traditional auctions, giving buyers more time to arrange a mortgage. The bidding period is normally 30 days with the winning bidder granted a 28-day exclusivity period in which to exchange contracts, and 56 days in which to complete the purchase.

Although these auctions can be better for buyers needing mortgages, they come with higher fees. For example, a reservation fee is typically between 2.5% and 4% of the sale price, with a minimum amount of several thousand pounds. This fee is on top of the property price.

Can you buy an auction property as a first-time buyer?

Yes, first-time buyers can buy a property at auction – but it’s important to know what you’re doing.

Bear in mind that “guide prices” are just that – a guide. Auction properties can go for over the guide price and first-time buyers in the auction room can be competing with more experienced property investors or cash buyers.

Before you bid, read up on the auction process, do your homework, and make sure you have your finance in place.

Your home may be repossessed if you do not keep up repayments on your mortgage. Terms and conditions apply to the mortgage decision promise.

Mortgage Quotes

Last Updated: May 17th, 2022

Phil Spencer

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