Mortgage for Auction Property

jbecker84

Hi All,

I am looking for some advice as I am a first time buyer hoping to bid on an auction property at the end of this month. I understand that a good broker and solicitor is imperative if buying at auction with a mortgage but I'm slightly confused as to whether a mortgage in principle or an actual offer is advisable? My friend is a surveyor and we are planning to view the property beforehand and I'm prepared to invest ahead of time in the necessary legal work (and risk losing money if I don't win the property). However, having spoken to a couple of brokers, I'm not any closer to understanding the process of getting a mortgage offer on a property I have not yet won.

If anyone has any experience of this process (good or bad), I'd be grateful to hear it.

Thanks!

Contemptuous

You can't get a mortgage offer without having won the property as far as I know (I haven't dealt with auction properties personally) but you could have an AIP in place.

kingstreet

You need a full formal mortgage offer before bidding.

You would appoint your solicitor and get them to scrutinise the legal pack.

You apply for a mortgage and get the property valuation done as normal.

You then go to the auction knowing the property is fine and what you can offer. You'll pay 10% on the night and the balance within 30 days, so a formal offer and not an AIP is essential.

jbecker84

Thanks kingstreet. So if the property is valued at £300k and I have an offer for a mortgage of that amount, less my deposit, agreed, then if I win the property for less than that amount is it difficult to change the terms of the mortgage?

Also, will the 10% auction deposit count as part of my mortgage deposit, or does this need to be considered as separate?

kingstreet

Ski-ing downhill is easy, so asking for the purchase price and mortgage amount to be reduced is straightforward.

10% deposit is 10% deposit. There is no mortgage deposit, auction deposit it's all the same.

If the difference between the purchase price and the mortgage amount is more than 10% (ie a bigger deposit) you simply give it to your solicitor with their fees and the other completion funds, such as SDLT.

jbecker84

Thanks for the advice!

mrginge

One question.
Is it realistic to have a full mortgage offer in place by he time of this auction?

kingstreet

mrginge wrote: »

One question.
Is it realistic to have a full mortgage offer in place by he time of this auction?

It should be. It depends how quickly the process is started once the auction date is known.

I suspect many people are put off by the idea of shelling out the fees to get to the point of a formal offer before they even have the opportunity to bid.

These days, you simply can't guarantee being able to get from app to offer or even DIP to offer within the required timescale with most lenders, so the thirty day thing can be a real off-put if you aren't at offer stage.