Auctions can be an affordable way to secure your first home – but can you obtain a mortgage for a house purchased this way? In his latest Ask the Expert column, Darren Polson helps a first-time buyer considering buying a property under the hammer
The Question
I am a first-time buyer and I am considering purchasing a property at auction because the homes seem to be much more affordable. I have a small deposit of around £12,000 and I am aware I’ll need some of this for costs and home improvements.
My question to you is, will I be able to get a mortgage for an auction property and, if so, how much deposit will I need?
Darren’s Answer
It’s great that you have built up a good deposit and are thinking outside the box when looking at your first purchase.
Auction properties used to be popular with investors and those who had enough money to buy the property outright without the need of a mortgage.
Now there are more and more first-time buyers like yourself looking at this as a way to get on the property ladder in a more cost-effective way. Whilst this is often the case, there are some things it’s important to be mindful of:
View the property
Auction properties will generally be listed online by an estate agent or an auction house directly. This is usually about a month before the auction. This gives you time to view the property beforehand and decide if you want to make a bid.
It’s crucial to view the property, obtain the valuation report, legal pack and auction notes, so you know all the facts before making an offer.
Remember, you can view the property as many times as you like to ensure you are 100% before you make an offer.
Make sure the property is habitable
Be aware that some properties sold at auction are not mortgageable or would require a specialist lender, so this is definitely something to look out for.
For example, always check the construction type and that the property is habitable, i.e. that it has a kitchen, bathroom, running water, is secure, weatherproof, and structurally sound.
Secure a mortgage and make an offer
When looking at the mortgage side, the first step is to obtain an Agreement in Principle from a mortgage broker. Make sure they know you plan to proceed with an auction property as this will impact the mortgage application.
When making an offer for a property, the auction price is a guide and will often have a range depending on the level of interest. Be sure to set yourself a maximum based on what you can afford.
Keep in mind other costs such as the auction fees and legal fees applicable.
Remember that you might need to obtain your mortgage offer quickly to help you make a timely offer for an auction property. A broker will need to keep this in mind when securing your mortgage.
Auction properties can be mortgaged like properties not sold through auction but there are key stipulations as noted above.
Auctions can be a great way to secure your first home and there are often bargains available for buyers. It is also typically a quicker process than a standard purchase but remember that there is a lot to keep in mind.
We recommend speaking speak to a mortgage broker who specialises in this purchase type and can guide you through the process.
Meet our expert…
Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over two years and is now here to answer YOUR questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
