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Can I get a mortgage on an auction property?

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Specialist mortgage lenders will offer you a mortgage on an auction property if it is habitable or lettable (assuming you meet the lending criteria and can afford the repayments).

It may be that your property isn’t habitable/lettable so how can you finance it? If your property doesn’t have a working kitchen and indoor bathroom, it’s unlikely you’ll get a regular mortgage. You’ll either need to pay for the property with cash or take out a commercial loan which will fund the purchase of the property and the renovation. Once the property is habitable/lettable, you can apply for a regular mortgage.


Buying a property at an auction differs from a regular purchase. On the day of the auction you are required to pay a 10% deposit on the property, with the full amount being due within 28 days. If you are not able to meet the 28-day deadline, you risk losing not only the property but also your deposit. This means you need to have done your homework on how you plan to fund the purchase.


Unless you are a cash buyer, your mortgage will need to be Agreed in Principle (AIP) before attending the auction. It’s important to choose a mortgage lender that can process your mortgage within this deadline as there are some lenders out there that won’t be able to meet this tight turnaround. Do remember that mortgage lenders will only lend on the valuer’s valuation of the property so be sure not to get carried away in the auction room.


If your chosen lender can’t work to the 28-day deadline you could consider a bridging loan to tide you over. Bridging loans are short term loans that “bridge” the gap until you can get funding in place, at which point you pay off the bridging loan. They can be arranged in approximately 10 days, but before jumping in, be mindful that the interest rates on these types of loans are much higher than on a regular mortgage.


If you auction property does need a substantial amount of work, you’ll need to work out how you are going to finance these renovations. If you’re planning on developing the property for rent or to sell on, the quicker you can do this, the less costs (interest) you’ll incur. If you are buying the property to use as your residence, this will not pose a problem.


You can sometimes pick up a bargain at auction, but it’s so important to do your research. Make sure you view the property and if you don’t know what to look for, take someone who does. And lastly make sure you read the legal pack as this can contain really important details which could affect what you are able to do with the property and the resale value.


Happy Bidding!

 

Please note the content of this blog is for guidance purposes only and does not constitute for professional advice. Contact us today at info@wolseymortgage.co.uk or by calling 01473 216950.

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Monday, 18 November 2019

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