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Arranging a mortgage on an auction property

This guide was last updated 8 November 2022

On the face of it, arranging a mortgage for a property bought at an Auction should be no different to any other mortgage.

However, there are some key points to note. Let’s take a look at what these are.

It is, for example, important to have your finances in place, at the very least with a mortgage agreed in principle, prior to bidding. This is because once you have put in a successful bid, not only will you have to put down an initial 10% deposit, but it is a legally binding agreement, which in most cases gives you a set time limit for completion. After all, you do not really want to be rushing around trying to get a mortgage in place in a short period of time only to find that there are issues that had not been considered.

Mortgage lenders work on a simple two-stage process: firstly, do they want to lend to you, the purchaser, and secondly, do they want to lend on that particular property? The good news is that many lenders will allow you to get the majority of the first part of the process completed in principle, before you actually have the property.

These agreements are valid for differing amounts of time, and various lenders have incredibly differing levels of service, which often vary week to week, so it is important to speak to a professional broker who is on top of the latest changes in service levels as well as mortgage rates.

In the current climate, lenders have introduced some tougher qualifying criteria and it can be a slower, more difficult process to get the required finance than you may have experienced in the past.

Each lender will require their own valuation of the property carried out by a valuer acceptable to them. Again, acceptable valuers vary from lender to lender so it is worth knowing which valuers are acceptable to which lenders.

We would never recommend that you buy a property unseen, so having a head start on the level a valuer would put on the property helps to set your own limits when entering into the bidding process and avoid potential shortfalls later on.

There has, however, recently been a return of lenders with some innovative products for purchasing properties that require some work on them, known as Light Refurbishment Products. These offer up to 70% Loan To Value loans on those properties classified as a Buy to Let rental property which will benefit from minor improvements such as a new kitchen or bathroom.

There is also a similar product that enables those professional landlords who may be purchasing slightly under value to borrow 85% of purchase price as long as this is no more than 70% of the market value.

“Bridging Loans can be an effective method of borrowing money”

There is also a wide variety of Bridging Loan Products available. Bridging Loans can be an effective method of borrowing money secured on a property very quickly for a short period of time, say 6 months. This will enable you to borrow, in certain circumstances, up to 100% of the auction price and give you time to upgrade the property in order to remortgage it to a standard mortgage lender.

This is, however, a complex area, which can be expensive. We strongly recommend you speak to an experienced mortgage broker to guide you through this area. In the meantime, you can take a look at our bridging finance guide to learn more about this product.

At Coreco, our consultants have a wealth of experience in dealing with properties secured at auction, having been in the mortgage industry for many years. This knowledge and experience is vital in ensuring that the whole process, from the moment you make your first bid to the moment you walk through the front door, is as painless and smooth as possible.

Give us a call on 020 7220 5110 or fill out the form below to arrange a no-obligation chat!

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    Andrew Montlake

    Written by Andrew Montlake

    Andrew Montlake, better known as Monty, began his journey with an Hons degree in Economics & Politics before starting in the mortgage industry in February 1994. As a main founder of Coreco in 2009, he successfully grew the brand, marketing, and communications, and was made MD in 2019 focussing on the overall vision, strategy, and culture of the company. As Coreco’s media spokesperson, Andrew can often be seen or heard on TV and radio as well as regularly commenting in the national, local, and trade press. He is the author of this acclaimed Mortgage Blog and is well-known for his social media, podcasts, and public speaking. Andrew is now proud to serve as Chairman of the Association of Mortgage Intermediaries, (AMI) as a cheerleader for the Mortgage Industry as a whole and continues to work at the coal face, writing mortgage business and advising clients.

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