Can You Get a Mortgage on an Auction Property?

Yes, you can get a mortgage on an auction property, but only if the lender can value the property, approve it and release the money before your completion deadline. At a traditional auction that deadline is usually 28 days after the hammer falls, which is tight for a mortgage. At a modern method auction you usually have 56 days, which is often enough. If the timing or the property does not suit a mortgage lender, buyers use cash or a short-term auction bridging loan and then remortgage once they own the property.

Which type of auction is it?

The first thing to check is the auction type in the listing, because it decides how long you have to raise the money. Every auction sets its own terms, so read the special conditions in the legal pack too: some traditional auctions allow more than 28 days and some modern method auctions allow less than 56.

Traditional auction vs modern method of auction

	Traditional (unconditional) auction	Modern method of auction (conditional)
When contracts are exchanged	When the hammer falls	Usually within 28 days of the auction
Payable on the day	Usually a 10% deposit, plus any buyer's fees	A non-refundable reservation fee, plus the deposit when you exchange
Time to complete	Usually 28 days, sometimes 20 working days	Usually a further 28 days after exchange, about 56 in total
Is a mortgage realistic?	Possible if the mortgage is fully prepared in advance and the property is straightforward	Often, for standard homes and buy-to-lets
If you cannot complete	You can lose the deposit and be pursued for the seller's losses	You can lose the reservation fee, and the deposit too once you have exchanged

Will a mortgage work for your auction purchase?

A mortgage is usually workable when most of the following are true:

• It is a modern method auction, or a traditional auction with at least 28 days to complete.
• The property is habitable, with a working kitchen and bathroom, and of standard construction.
• You have a mortgage in principle from a lender that will value the property quickly.
• Your deposit covers at least the 10% due on the day plus any gap if the valuation comes in low.
• Your solicitor has checked the legal pack and found nothing that would worry a lender.

You will probably need cash or bridging finance if any of these apply:

• The property is uninhabitable, for example with no kitchen, structural problems or damp severe enough that a lender would retain money or decline.
• It is of non-standard construction, has a short lease, sits above commercial premises or has title problems.
• You plan to refurbish, convert or split it before letting or selling.
• Completion is due in 28 days or less and you have not already started the mortgage application.

Lenders are wary of auction properties because many are sold at auction for a reason, such as condition, a short lease or a probate or repossession sale. See our guide to mortgages for unusual properties for the property types that need a specialist lender.

How to buy a house at auction with a mortgage

The work happens before the auction. Once you have won, there is too little time to start.

Timeline for a traditional auction with a 28-day completion

When	What to do
2 to 4 weeks before	Get a mortgage in principle, check how much you can borrow and ask the lender or broker whether they can meet a 28-day completion on an auction purchase.
1 to 2 weeks before	View the property, get a survey if possible and have a solicitor review the legal pack and special conditions.
Auction day	Bid within your limit. If you win, you exchange and pay the 10% deposit and any fees there and then.
Days 1 to 3	Submit the full mortgage application and book the lender's valuation straight away.
Weeks 1 to 3	Valuation, underwriting and the mortgage offer. Two to four weeks is typical once everything is in.
By day 28	The lender releases the funds to your solicitor and you complete. If the offer is not ready, a bridging loan is the usual fallback.

With a modern method auction the steps are the same, but the 28 days to exchange give you time for the valuation before you are committed to the full deposit.

What if the valuation comes in below your bid?

The lender lends against its valuation, not the price you paid. If you bid £250,000 and the lender values the property at £230,000, a 75% mortgage is £172,500 rather than £187,500. You have to find the £15,000 difference in cash, on top of your deposit, before the completion date. Set your maximum bid with that risk in mind, especially for properties in poor condition or with few comparable sales.

What does buying at auction cost on top of the price?

Typical costs of an auction purchase

Cost	What to expect
Deposit	Usually 10% of the hammer price on the day at a traditional auction, often with a minimum amount
Buyer's premium or administration fee	Set by the auction house and shown in the listing. Usually payable on the day
Reservation fee (modern method)	Non-refundable and on top of the price. Check the amount in the listing
Seller's costs passed to the buyer	Some legal packs ask the buyer to repay the seller's searches or legal fees
Stamp Duty Land Tax	Normal rates apply, including the surcharge on additional properties (see gov.uk)
Legal, survey and lender fees	Your solicitor, a survey, and the mortgage or bridging arrangement and valuation fees

Using a bridging loan to buy at auction

Most auction buyers who do not pay cash use a bridging loan. A bridging lender can often complete within days, will lend on properties a mortgage lender would decline and looks mainly at the property and the exit, which is how you will repay. The usual exit is a remortgage or a buy-to-let mortgage once the purchase has completed and any works are done, or the sale of the property.

Bridging costs more than a mortgage. Interest is quoted monthly, there is usually an arrangement fee of 1% to 2% and there may be exit and valuation fees, so it suits a short period with a clear exit. Read how auction finance works, how quickly a bridging loan can be arranged, or see our Auction finance page for rates and loan-to-value limits.

Enness case study: a £300,000 auction purchase

Short-term finance for a property auction purchase

The deal	Detail
Purchase price	£300,000
Client's cash	£140,000
Bridging loan	£160,000, about 53% loan to value
Rate and term	0.58% a month over 12 months
Exit	Refinancing agreed as part of the arrangement

The client had already committed to the purchase when their surveyor ran into problems. Enness helped resolve the survey and arranged the finance in parallel through private banking contacts, so the purchase completed within the deadline. Read the case study.

At 0.58% a month, interest on £160,000 is about £928 a month, or about £5,570 if the loan is repaid after six months. This is illustrative and excludes fees. On a larger scale, Enness has arranged a £1.9 million refurbishment bridged and then refinanced onto an investment mortgage.

Can first-time buyers get a mortgage on an auction property?

Yes, but it is harder. First-time buyers usually need a high loan to value, which leaves little room if the valuation is low, and they cannot normally use bridging finance on a home they will live in without a clear plan to repay it. A modern method auction on a property in good condition is the most realistic route. Have your mortgage in principle, deposit and solicitor in place before you bid.

Buy-to-let and refurbishment purchases

Landlords can use a buy-to-let mortgage for an auction property that is ready to let, as long as the rent covers the lender's stress test. Where the property needs work first, the common route is to buy with bridging finance, refurbish and then refinance onto a buy-to-let mortgage, often at a higher valuation. For owner-occupiers planning works, a renovation mortgage may be an option after completion. Unique property finance covers listed, non-standard and other properties mainstream lenders turn down.

Speak to an Enness Global adviser before the auction about whether a mortgage can complete in time or a bridging loan is needed. Call +44 (0)203 758 9393, email info@enness.co.uk or contact us. See also Mortgages.