We understand that a number of buyers won’t have the cash to buy a property upfront by the time an auction rolls around. However, this doesn’t mean you have to miss out on your new investment or home.
A mortgage isn’t exclusive to properties being sold through an estate agent, you can purchase auction properties too. Some auction properties however are ‘unmortgageable’, but don’t worry - we’ve covered this criteria below.
Unmortgageable conditions
For an auction property to be eligible for a mortgage, it usually needs to be in good condition. Some properties will be in too poor condition to be considered for a mortgage, and are therefore only suitable to cash buyers.
Our auction listings will usually detail whether or not a property is unmortgageable, but here are some things to look out for:
• Properties without a kitchen or bathroom.
• Properties with any structural defect, damp, dry or wet rot.
• Properties close to mining works, areas of landfill, and areas of recent flooding or subsidence.
• Leasehold properties with a short lease, typically less than 70 years, or a defective lease.
• Where there are boundary disputes or where planning applications have not been applied for correctly.
• Derelict property or where part of the building is in severe disrepair and needs demolishing.
• Properties of non-standard construction. Standard construction has brick or stone walls with a roof made of slate or tile, so anything that differs from this will be classed as Non-Standard.
• Some properties with sitting tenants or regulated tenancies.
• All properties with a value below a threshold, sometimes stated as £40,000.
Preparing to buy with a mortgage
When buying at auction, contracts are exchanged at the fall of the hammer. This means you will need to choose a lender that can act quickly, and have the funding guaranteed ready for completion. You will need to have your mortgage in place and your mortgage offer to hand when you bid in the auction room.
Auction finance
Instead of a mortgage, some buyers choose specialist auction financers which provide short-term finance, bridging loans, commercial finance, buy-to-let mortgages, and secured loans. It can be more expensive, but these lenders can act quickly.
Auction finance companies can lend to those who are employed, self-employed, limited companies, limited liability partnerships, sole traders, and partnerships. They are also very flexible about the types of property you are looking to purchase and the circumstances of your purchase.
Are you considering buying a property with a mortgage or specialist finance? Get in touch with your local auctions team today!
