Can You Get a Mortgage on an Auction Property?

Do Mortgage Lenders Offer Mortgages for Auction Properties?

Yes, you can get a mortgage for a property sold at auction! However, there are some criteria that must be fulfilled, and not all properties sold at auction can be bought with a mortgage. The process also varies depending on whether you are planning on buying a property through a traditional or modern method of auction. 

As with other mortgages, you will need to get an agreement in principle from a mortgage lender. This is based on your financial situation and you will need to provide proof of income, bank statements, proof of address, photo ID, and a credit check. The lender will not offer you a mortgage on properties considered ’unmortgageable’. This means that the property must have a kitchen and bathroom, it can’t be in disrepair, it cannot have major structural issues, damp problems or other things that would make a mortgage lender refuse to mortgage a property. If a lease on a leasehold property is too short, a mortgage lender is also likely to refuse a mortgage. Look for properties that are in good condition, have long leases, or are freeholds.

Traditional vs Modern Method of Auction

If you are looking to buy a property at a traditional auction, you will need to obtain a mortgage offer fast, so you can make a timely offer on the property. The modern method of auction allows you more time to secure a mortgage before the end of the auction, so this could be a better option. Either way, the mortgage lender will ask for a mortgage valuation survey to be completed on the property to make sure it’s worth the sale price. If the valuation reveals it is not worth the agreed sale price, the lender may reduce the amount they offer you, or even refuse the mortgage outright.

Conditional vs Unconditional Auction Sales

Some property auctions demand payment within 28 days of the auction, as well as a deposit. There are two types of property auction – conditional sale and unconditional sale. An unconditional sale is where the buyer is expected to pay at least a 10% deposit on the day and then pay the remaining balance within 20 days. This is not recommended for buyers who need to secure a mortgage, as this is usually not enough time. A conditional sale is where the buyer is granted an exclusivity period of 56 days, during which time they can arrange a mortgage. This is ideal for buyers who are using a mortgage to buy property.

How Much Deposit Do I Need to Buy a House at Auction?

The deposit for a property bought at auction is usually 10%, and this is payable on the day of the auction. At a traditional auction, the 10% deposit is paid once you win the bid. At a modern auction, upon winning the bid, you have to pay a reservation fee, which is usually 5% of the purchase price. You would then have an additional 28 days to pay the 10% deposit, and then a further 28 days to complete the sale. You may also need to pay auction fees to the auction house, including an administration fee. Other fees may be applicable too, including a buyer’s premium, if the seller specifies that the buyer must contribute to selling costs, and any other additional costs listed in the conditions of sale. All of these extra costs will be detailed in the auction legal pack, so you should take a close look at this before bidding.