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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 can you get a mortgage on an auction property?

To get the best idea of your mortgage options and if you can get a mortgage on an auction property 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 for most customers and has access to over 12,000 deals from 90 lenders.

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Your home may be repossessed if you do not keep up repayments on your mortgage.

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, individuals seeking mortgages may be less inclined to buy at this type of auction.

In an online property auction, buyers, also known as ‘modern method of auction’ buyers, have a grace period of 28 days to complete all their paperwork before they must put down a deposit and make a legal commitment to buy the property. This allows the buyer a longer period to conduct a survey on the property and sort out their finances.

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 within the time frame could 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 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 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 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.

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Your home may be repossessed if you do not keep up repayments on your mortgage.

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.

If you are in the fortunate position of being a cash buyer, then another way of buying at auction is with cash, which avoids financing altogether.

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.

Mortgage Quotes

Your home may be repossessed if you do not keep up repayments on your mortgage.

Last Updated: November 29th, 2023

Phil Spencer

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