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Buying a house at auction isn’t just for cash buyers. But if you need a mortgage on an auction property, there are some extra steps you’ll need to take and risks to beware of. We explain the step-by-step process of getting mortgage on an auction property.
KEY INFORMATION
It is possible to get a mortgage on an auction property, but there are extra steps you’ll need to take and factors to beware of.
First of all, if you’re using a traditional auction, you’ll need to obtain your mortgage offer quickly to help you make a timely offer for an auction property. This is because you’ll need to exchange contracts on the day of the auction and complete (and therefore need to have the money to buy the house) 28 days later.
Some lenders may struggle with this timescale so make sure you get fee-free advice from a mortgage broker on the best lender for you to apply to.
You also need to make sure the property you want to bid on is mortgageable i.e. that it has a kitchen, bathroom, running water, is secure, weatherproof, has a heating system and structurally sound. If it doesn’t, you can buy the house using specialist lending in the form of a bridging loan.
If there is a delay in getting your mortgage on an auction property you can take out a bridging loan to ‘bridge the gap’ in funding. A bridging loan can also help you but a house at auction that isn’t quite habitable so deemed un-mortgageable. In this instance, once you’ve improved the property so that it is ‘mortgageable’, you can then take out a standard residential mortgage on it. Read on for more on how bridging loans work.
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
Need a mortgage on an auction property? Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Here’s the step-by-step process of how to get a mortgage on an auction property.
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
KEY INFORMATION
Getting a mortgage on an auction property in place by the 28 day completion deadline can be tricky because the lender may need more time:
Auction properties used to only generally attract investors and those who had enough money to buy the property outright without the need of a mortgage. But first time buyers are increasingly seeing auction properties as a more affordable way of getting on the property ladder.
But do your research carefully so you know what you’re getting into. With a normal house purchase you can pull out at any stage before exchange of contracts. But if you pull out of an auction purchase after you’ve agreed to buy it you’ll have to forfeit your deposit and could face other costs too.
If you’re a first time buyer start by checking how much you can afford and getting a mortgage agreement in principle. Read more about First Time Buyer Mortgages.
This depends. The mortgage lender will require it to be ‘mortgageable’, for example it will need to have running water and a kitchen and bathroom.
But there are other types of auction financing. One common type of auction financing are bridging loans. You can arrange bridging loans quickly in order to buy the property and auction and to finance renovations. Then once it’s habitable and mortgageable, you can then remortgage onto a traditional residential mortgage.
Use this free bridging loan calculator to get a detailed estimate of interest, charges and other costs of your bridging finance.
For bridging loans, homeowner loans, bad credit mortgages and more speak to specialist lending brokers now.
Here are the pros and cons of different types of auction financing
| Auction finance type | Pros | Cons | Best for |
|---|---|---|---|
| Mortgage on auction property | Lower mortgage rates. Can fix for longer term | Takes time to process, property must be ‘mortgageable’ | Properties in good condition |
| Bridging loans | Quick to secure, allows buying unmortgageable properties | Higher risk as high interest rates, short-term | Delays in getting a mortgage, properties needing renovation |
| Cash Purchase | No risk of a mortgage being delayed or being rejected, fast transaction | Requires large funds | Investors, cash buyers |
This guide is focused mainly on getting a mortgage on an auction property bought in a traditional auction. But there are two types of auctions when you’re buying a house and they work in different ways:
This is the traditional auction process. Once the hammer falls you’ll need to exchange contracts and usually pay a 10% deposit. You’ll then usually need to pay the rest a month later. Read more in our guide Buying a house at auction: What you need to know.
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
When you’re buying a house via a traditional auction, you’ll exchange contracts on the day and pay a 10% deposit (plus any other fees listed in the property details). You’ll pay the remaining 90% 28 days later when you complete.
You don’t need to have a survey done when you’re buying a house but it can be a wise investment. When buying at auction you may be reluctant to spend the money on a survey in case you’re outbid. But this could be an expensive mistake.
There are many factors that can make a house unmortgageable (which means a lender won’t lend a mortgage on it) such as if there’s no kitchen or bathroom. If you’re buying a house at auction that’s unmortgageable you can take out a bridging loan to cover the cost of the property and renovation work. Then once it’s mortgageable, move to a standard residential mortgage.
No, you don’t need to be a cash buyer to buy a house at auction. Getting a mortgage on an auction property is possible providing you move fast and the property is mortgageable. The other two main type of auction financing are bridging loans.
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.
HomeOwners Alliance Ltd is an Introducer Appointed Representative of Mortgage Advice Bureau (Derby) Limited which is authorised and regulated by the Financial Conduct Authority.
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of LifeSearch Limited, an Appointed Representative of LifeSearch Partners Ltd, authorised and regulated by the Financial Conduct Authority. (FRN: 656479).
Independent Financial Adviser service is provided by Unbiased, who match you to a fully regulated, independent financial adviser, with no charge to you for the referral.
Bridging Loan and specialist lending service provided by Chartwell Funding Limited, registered office 5 Badminton Court, Station Road, Yate, Bristol, BS37 5HZ, authorised and regulated by the Financial Conduct Authority (FRN: 458223). Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.
