If you cannot buy a property bought at auction for cash, then you will likely require a loan. Before you start bidding, there are a number of considerations to bear in mind about auction property loans.
Firstly, after a winning bid, 10% of the purchase price needs to be deposited, with the rest due 28 days after the auction.
If you bid on a very low priced property, it might be the case that it is inhabitable until refurbishment work has been completed. Most mortgage lenders will not consider loans for property that is not fit to live in, and even if you have the cash for refurbishments, this may not be enough time to complete the refurbishment work and arrange for a mortgage on the improved property before the 28-day deadline. The alternative is bridging finance, which can be arranged quickly to fund both refurbishment work and complete the property purchase.
The total amount you can borrow for a mortgage is based on the value of the property as assessed by a valuer acting on behalf of the lender. If you get carried away during a fierce bidding battle, it could lead to paying above the market value of the property. If the property is valued below what you have paid for it, then you will probably not be able to obtain a mortgage or bridging loan to pay for the whole of the purchase. Make sure that you research the property market before bidding on auction property.
