Purchasing at Auction a double deposit?

ac427

I am considering purchasing a property at auction. I have worked out that if the property sold at a winning bid of say £200k i would need to pay 10% on the day to the auction house. This leaves to a remaining balance of 180k to be found within 28 days time.

Does this then mean i will have to find the deposit for the £180k mortgage (25% LTV) offer too? If this is the case i would need to find an additional £45k making a total of £65k for a £200k house. i really don't see how this 'bag yourself a bargain at auction' works unless no-one was that interested in the property and it went for a lot less than open market price.

If the house was no the open market for £200k i would only need to find £50k deposit thus saving £15k

Is there a way of incorating the 10% auction house fee into the mortgage offer?

Or have i got it wrong and i just need to find a better mortgage deal?

betmunch

The 10% you put down at the auction is included in you deposit when the lender gives you their offer.

So if you wanted to put down 25% you would put down 10% at the auction and send the remaining 15% to your solicitors for completion.

However, you shouldnt buy at auction with a mortgage, unless you have the full mortgage offer before the auction actually starts. There are too many things that can go wrong and cause you to lose your deposit money.

Ankatden

If you are going to do it then have fallback position including Bridging Finance if doesn't look like your mortgage willgo through within time frame.

DH has done this on one occasion but on number of others he got BTL mortgage through within that time period but as he uses same sols / brokers etc he made a couple of calls and survey was happening in 24 hours because he has the relationship already.

PasturesNew

As has been said, on a property selling at auction at £200k, you'd give them £20k on the day, but your mortgage on a LTV of 75% would be £150k, so you'd need to get £30k to your solicitor in advance of completion.

There are other fees you pay to the auction house on the day too, not a great deal, but you need to find out how much they are.

ac427

Ankatden wrote: »

If you are going to do it then have fallback position including Bridging Finance if doesn't look like your mortgage willgo through within time frame.

DH has done this on one occasion but on number of others he got BTL mortgage through within that time period but as he uses same sols / brokers etc he made a couple of calls and survey was happening in 24 hours because he has the relationship already.

Who is DH, Ankatden ?

Thanks all for the replies, i though another dream had died :A

Richard_Webster

I am considering purchasing a property at auction. I have worked out that if the property sold at a winning bid of say £200k i would need to pay 10% on the day to the auction house. This leaves to a remaining balance of 180k to be found within 28 days time.

Does this then mean i will have to find the deposit for the £180k mortgage (25% LTV) offer too? If this is the case i would need to find an additional £45k making a total of £65k for a £200k house. i really don't see how this 'bag yourself a bargain at auction' works unless no-one was that interested in the property and it went for a lot less than open market price.

If the house was no the open market for £200k i would only need to find £50k deposit thus saving £15k

Is there a way of incorating the 10% auction house fee into the mortgage offer?

Or have i got it wrong and i just need to find a better mortgage deal?

OP has got two different meanings of "deposit" confused. A lot of people refer to deposit as the difference between their mortgage and the purchase price. Solicitors refer to deposits as the amount paid over on exchange of contracts, which is never more than 10%. The rest of the money that the lender is not providing is simply the balance of the purchase money which you will also have to find and pay over on completion - so if you were getting a £150K mortgage on a £200K property and you paid 10% (£20,000) on exchange/at the auction then you will have to find a further £30K to give to your solicitor so he can pay a total of £180K over at completion (the rest of the money having been received by him from your lender.)

A £180K mortgage on a £200K property would be 90% LTV. If you lender will only do 75% LTV they are not going to lend you £180K on that property.

Get your formal mortgage offer before you go to the auction otherwise you could be in big trouble if the property fails survey. Also get a solicitor to look at the legal pack as soon as it is available - you do not want to find that there are things in that which make the place unmortgageable! To clarify, it is perfectly possible to have a formal mortgage offer and for the solicitor to say that the title/covenants etc are such as to make it impossible for him to certify title to the lender - in which case the offer is unusable.

Ankatden

ac427 wrote: »

Who is DH, Ankatden ?

Thanks all for the replies, i though another dream had died :A

DH = Dear Hubby