Can You Mortgage An Auction Property

Can You Mortgage An Auction Property?

Are you looking at buying a property at auction and want to know if you can use a standard mortgage? Find out more here.

What is the process when buying a property at auction?

Buying a property at an auction is very different to buying one in the usual manner through an estate agent. The main difference is you need to act very quickly and you usually have to commit financially to the process almost immediately.

It is usual to exchange contacts on the day of the auction and put down 10% of the purchase price that same day. For example, if you are buying a property at auction for £250,000, this would mean parting with £25,000 on the day so it could be very expensive if you don’t do things properly.

Once contracts have been exchanged, there is a short amount of time to complete which is often 28 days but it may be longer. Always find this out in advance so you know how much time you have on your side.

Due to the timescales involved with property auctions and the implications of not completing them in time, taking financial advice from a mortgage broker with experience in auction finance is highly recommended. Find out more information from Propertymark about buying a property at auction.


An expert mortgage adviser on the phone speaking to a customer

Why would people choose to buy a property at auction?

The main reason people buy a property at an auction is to find one with plenty of potential to be improved and sometimes get it for a lower price than what they may have if it was bought in the usual manner through estate agents.

Some property developers and builders often love to buy properties at auctions as they have the skills to add value to the properties to keep in their portfolio or sell, hopefully for a profit.

Some people would buy a property through auction as they want a very quick completion and with some auction properties completed in less than 28 days, this can be a way of getting one.

Can you mortgage an auction property?

Although it’s not completely impossible to take a standard mortgage for an auction property, it can be very dangerous.

The reason is, with many types of property auctions, there is only a short amount of time to complete the transaction and if completion does not take place, you can lose the 10% deposit that was out down and even further costs for breaching the contract.

When you take a standard mortgage, they are not designed for transactions like this and if underwriting takes longer than expected, the lender is not comfortable with the application, the property or any other reason which makes them decline, this could land you in a bad situation.

As a result, taking a standard mortgage can be very risky indeed when looking to buy an auction property. 

Do standard mortgage lenders accept property in any condition?

No, a property has to be in a mortgage acceptable condition for the lender on a standard mortgage to offer the loan.

What that means can vary from lender to lender and even one mortgage valuer’s opinion may differ from another valuer’s opinion. This is another reason that taking a standard mortgage against an auction property can be very risky.

Many properties being bought at auction are not in the best condition and may not be suitable for living in immediately by the new owner or renting out.

Waiting to send out a mortgage valuer to find out that person does not think it meets the standard of the lender could be costly.

Auction finance lenders will also have their criteria about what is and isn’t acceptable from a property and perhaps certain checks that are required (for example, structural reports) but bridging lenders can generally be more flexible.

This is why it’s important to do as much due diligence on the property before the auction to be able to accurately present it to an auction finance professional so they can give you an idea of what to expect from the process.

run down house that was sold in an auction

What type of finance is for an auction property?

When people talk of auction finance, it refers to bridging finance. Bridging finance is taken on properties involving auctions as it allows the lenders to move the finance to offer quicker than a standard mortgage.

It is still important to take professional advice when considering auction finance as you will need to make sure that both you and the property meet the criteria for the lender to agree on the finance so there are no problems following the auction.

The lender will need to know about you, your experience and your plan to exit from the bridging loan in the future. This could be by selling the property that you’ve bought at the auction or by potentially refinancing it to a standard mortgage when the timescale is less restrictive or the property meets standard lending requirements if being improved.

To get an idea of whether you would qualify for auction finance and what the terms would be before you visit an auction, it would be prudent to speak with a bridging finance broker with experience in property auctions so you are as prepared as you can be on the day of the auction.

I’m considering buying a property in London at auction. Do you know of any auctions I could look at that sell property in London?

When looking for a property to buy in London, many sell via property auction. This may allow you to pick up an unusual property or a London home with lots of potential.

If you are planning to attend one of these auctions, do your homework in advance, become familiar with the property that you’re interested in and know your budget so you don’t get carried away.

You need to be sure that you’ve got access to the auction finance needed to complete the transaction within the contracted timescale, this is usually around 28 days with the exchange of contracts taking place at the auction. 

A large property auction company that sells properties in London is Allsop. Read more: Mortgages In London.

Can any mortgage adviser arrange for a mortgage for an auction property?

Most regulated mortgage brokers will have access to auction finance but it may be that some mortgage advisers do not feel comfortable with arranging auction finance.

This may be as they tend to work on more conventional purchases each day with less financial implications if timescales are not met. If this is the case, they may be unfamiliar with the bridging process and what each lender is going to ask for.

It would be recommended to find out from the adviser what experience they have in arranging finance for properties at auction to make sure that you feel comfortable enough with the broker to proceed.

Happy mortgage broker giving free mortgage advice over the phone


How can I NEED ADVICE help when I need a mortgage for an auction property?

Buying a property at an auction may be a way of getting a bargain but make sure you do lots of homework and know what you are buying and all the potential issues with the property. Buying a property at auction when if you’re unprepared could be very costly.

Know your budget when you go to the auction and if you need finance, make sure you have looked into this in advance.

If you are serious about buying a property via an auction and want to speak with an auction finance professional for indicative terms, I NEED ADVICE can arrange for an experienced adviser to give you your options.

If you would like this, please complete the contact form.

The information on this page is not tailored to any individual readers and should not be considered financial advice under any circumstances.

If you are seeking advice about a mortgage, you should consult a qualified professional.

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