Buying a house at auction with a mortgage(5 tips)

What considerations should you make when buying a house at auction with a mortgage?

When buying a house at auction with a mortgage you will have to move very very fast, this means you will likely have to exchange contracts and complete your mortgage on the same day.

Buying a house at the auction will mean you would have already received a mortgage offer for a certain amount so you can place genuine offers when you are at the auction house.

The mortgage you will have at auction is known as a mortgage with retentions.

If you don’t have a mortgage ready then you will need a mortgage broker who can possibly source a mortgage for you in a relatively short time so you don’t lose the house you have won at auction and incur any penalties.

Some mortgage lenders who lend for houses bought at auction will also provide what is known as specialist auction finance.

This type of finance can be more expensive than a standard mortgage for a house but at auction as it offers various services and benefits (such as speed) which are suited to people buying homes at auction with a mortgage.

If you want to get a residential mortgage on a property then you should try and avoid getting a property with tenants as you will need a buy to let mortgage or commercial mortgage.

When buying a property through auction you will usually have to pay a 10% mortgage deposit on the property and then complete on the purchase within 28 days.

Some properties which are available at auction may be hard to mortgage.

These include:

• Properties with subsidence issues
• Properties with Japanese knotweed issues
• Properties with unusual building materials

What kind of auction houses can be mortgaged?

Dilapidated properties are properties which have different issues or things missing such as a roof, damaged walls, broken windows, doors, broken floors etc

This type of auction houses may be hard to get a mortgage on and will likely be properties that haven’t been looked after for a long time and hence need a lot of renovation.

Home emergency teaser Dilapidated properties may or may not be mortgageable; it really depends on the level and type of damage. For example, most lenders won’t consider properties without a functional kitchen or bathroom.

Your mortgage lender will be able to let you know if you can get a mortgage on the house.

In some cases, if the house is dilapidated the mortgage lender may not release all the mortgage funds to you and only release the fund when you have rectified the issues with the house.

Some self-build mortgages might be a better option if the property needs a full renovation, conversion or rebuilding.

Repossessions

If a home has been repossessed then it may be straightforward to get a mortgage at auction for that house.

Repossessed homes are homes which the owner has defaulted on the mortgage repayment and has therefore led the mortgage lender to do a home reposession to recover the funds they lent on the property.

In most cases, the mortgage lender will want to move the property on faster to recover their funds as soon as possible.

Repossessed homes may likely be sold through estate agents before they reach the auction house due to the incredible discounts that may be offered through them. In these cases gazumping is almost certain as the mortgage lender looks for the best price.

Probate sale

You will be able to buy a probate house with a mortgage at auction.

Probate houses are houses where the previous owners have died and the estate are simply trying to sell the house as soon as possible.

Whilst the estate might have an emotional attachment to the house they are usually very keen to get rid of it in the easiest way possible and hence the auction house.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.