Mortgages for Auction Properties

Do I need to have a mortgage for an auction property before I bid?

Some people pay in full at property auctions, but if you’re not in a financial position to this it it likely that you will need a mortgage.

It’s a very good idea to arrange this before you set foot in the auction room. You need to pay a 10% deposit on the day of the auction, but you will usually only have 28 days to pay the rest of the balance – which doesn’t leave you a lot of time in which to get a mortgage arranged if you haven’t done so before the auction.

If you fail to pay the remaining 90% balance in time, you could lose the property as well as your 10% deposit. It’s therefore very important to go into a property auction with financial arrangements already made and with a clear budget in mind. Remember that there will also be other costs involved including fees for surveyors and solicitors, so make sure you factor these into your overall budget before you bid.

Look out for specialist mortgage brokers

Mortgage lenders are sometimes reluctant to offer good deals to potential buyers of auction properties – particularly if the property needs extensive renovation or has structural issues. If you are looking to get a mortgage for an auction property, it may be worth looking into specialist mortgage brokers in order to get the best deal for your circumstances.

How is an auction property mortgage repaid?

If you take out a mortgage in order to buy a property at auction, you will be expected to repay it in the same way as any other mortgage taken out following the more traditional home-buying route. There are various interest rate options available which can allow you repay their mortgage in a way that suits you, including:

• Fixed rate mortgage  – your interest payments are fixed for a set period of time (usually several years) after which you will be moved on to another rate
• Standard variable rate mortgage  – your interest will vary with your lender’s mortgage rate
• Tracker mortgage  – your interest rate will move up or down by tracking an external rate, such as the such as the Bank of England Base Rate