Mortgage for auction purchase

Getting a mortgage for an auction purchase

Using a mortgage for auction purchase is possible, but it is often less practical than A bridging loan for auction property due to strict auction deadlines. Most auctions require completion within 28 days, while residential mortgages involve longer underwriting, valuation, and legal processes. These delays make traditional auction mortgages harder to complete on time and increase the risk of losing the deposit if the transaction does not complete.

When a Mortgage Works Best

A mortgage for auction purchase is better suited to properties bought via the modern method of auction, where completion periods are typically 56 days or more. This additional time allows lenders to complete valuations, legal checks, and searches. In these cases, a residential mortgage can be cheaper than a bridging loan, particularly where the property is already mortgageable and the transaction is straightforward.

Challenges with Mortgages at Auction

For auction properties in poor condition, such as those without kitchens or bathrooms or requiring heavy refurbishment, most residential mortgage lenders will not lend until the property meets mortgageable standards. Legal complexities can also extend timelines, and while AVM (Automated Valuation Model) valuations can speed up some residential cases, they are not always accepted for auction properties. These issues make mortgages risky for standard auction deadlines.

Why Bridging Loans Are Often Preferred

Auction Bridging Loans are often preferred because of speed and flexibility. A bridging loan for auction property can typically be arranged within 5-14 days, enabling completion well within the 28-day auction timeframe. Bridging loans are suitable for un-mortgageable properties, refurbishment projects, or short-term strategies. Once the property is suitable, borrowers can refinance onto a residential mortgage, a buy to let mortgage for house purchase, or a commercial mortgage at a lower long-term rate.

Cons of Mortgages vs Bridging Loans

• Too slow for most 28-day auctions
• Difficult to arrange for properties needing heavy work
• Requires full legal searches and valuations, which can delay completion