First time buyer help!! Mortgage + Auction!!!

32
Posted 8th May
Hi all,

Im looking at purchasing a property, on my own so wont have anybody else on the mortgage.

In the current climate I know its all a bit different but im struggling to get my head completely around the process etc.

We have found the perfect property, right area, right size etc.... BUT its an auction property.

I have a mortgage in principle/ relatively good deposit.

Basically I have a couple of questions:

1. Its not a new build property so do I qualify for any government help?
2. Does the fact its an auction property affect the government help?
3. As its at an auction, is it possible to monetise the mortgage offer in 28 days?
4. How does the mortgage offer affect the mortgage I can take out?
5. Does anyone have a calculator as to which mortgage is best? (focusing on whether a free option or paid option is better)??


Thankyou for the help in advance, throwing myself in the deep-end I feel!
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I’m a financial adviser. 50% of the time auction properties my clients bring to me are unmortgageable. Luckily they are normally individuals with 5-100 other properties they can remortgage to withdraw cash.

The main reason a property is at auction is due to this. The best example I had this year was a property where there was no right of access. You wouldn’t know this from looking, but it meant emergency services couldn’t access the property for example, and you wouldn’t have coverage if you were ill. No mortgage company would touch it.

Do not use a mortgage for an auction property unless you have the cash to cover yourself.

It is particularly terrible advice to try this right now as all mortgage lenders need to value properties. Some are being auto-valued online. Some aren’t. If you fall in to the latter category your application will be put on hold and in that time you’ll lose your auction deposit.

Please please do not do this.
Edited by: "donny1266" 8th May
No help and auctions are mainly for cash buyers
Also worth noting that the auction advertised price won't be anywhere near what it actually will sell for. Is the house still looking like a bargain if it is 50% more?
Look at prices in your area for past auctions.
32 Comments
No help and auctions are mainly for cash buyers
Being honest here you need to see advice from a pro. Mortgage is not as simple as a quick few grand loan from a bank.
Last, but definitely not least, you need to get your finances in order before the day of the auction. Once the hammer goes down, you must be able to hand over a 10% deposit, with the remaining 90% required within 28 days. Don’t assume you’ll be able to get finance in that time – it’s wise to ensure you have a loan or mortgage agreed in advance of the auction and an application in process, or you’ll risk losing your 10% deposit.
Mortgages normally take several months to arrange. In the current climate with everything else the banks are having to do I suspect it will take even longer.

I suggest you would be unwise trying to purchase an auction property with your funds being from a mortgage.

If you really want the property make the agents an offer now - they may accept it and take it out of the auction.
xtreme12308/05/2020 13:39

No help and auctions are mainly for cash buyers


Thankyou!

richje10008/05/2020 13:40

Being honest here you need to see advice from a pro. Mortgage is not as …Being honest here you need to see advice from a pro. Mortgage is not as simple as a quick few grand loan from a bank.



Its so annoying, Ive rented for years and have always paid in full and on time. Ive spent 2 years looking for the perfect house, find it and its an auction *Sigh*

Never had a loan either, a credit card and phone contracts to bump up my credit score but never a loan, have no idea what thats like either!
Van197308/05/2020 13:44

Mortgages normally take several months to arrange. In the current …Mortgages normally take several months to arrange. In the current climate with everything else the banks are having to do I suspect it will take even longer.I suggest you would be unwise trying to purchase an auction property with your funds being from a mortgage.If you really want the property make the agents an offer now - they may accept it and take it out of the auction.


Tried that tack, but apparently must be done through the auction process so would still have 28 days -.-

Seems very harsh to me this whole auction malarky!
fearona08/05/2020 13:43

Last, but definitely not least, you need to get your finances in order …Last, but definitely not least, you need to get your finances in order before the day of the auction. Once the hammer goes down, you must be able to hand over a 10% deposit, with the remaining 90% required within 28 days. Don’t assume you’ll be able to get finance in that time – it’s wise to ensure you have a loan or mortgage agreed in advance of the auction and an application in process, or you’ll risk losing your 10% deposit.


Ive got the 10% deposit, and more to cover the respective fees you have to pay, which IMO are way to heavily weighted on the buyer!

It seems very risky, even with a mortgage in principle can you start a full application (rather than just the mortgage in principle) prior to purchasing?
Deal.hunter12308/05/2020 13:48

Ive got the 10% deposit, and more to cover the respective fees you have to …Ive got the 10% deposit, and more to cover the respective fees you have to pay, which IMO are way to heavily weighted on the buyer! It seems very risky, even with a mortgage in principle can you start a full application (rather than just the mortgage in principle) prior to purchasing?


Yes - but that is when you start incurring costs which you have to pay even if you don't win the auction.
House might not be appropriate for mortgage purposes. Whilst you have a mortgage agreed in principle the lender would need to ensure that any property is good to mortgage.............hence a valuation.
The issue with auctions are that you could end up over paying for the property
Deal.hunter12308/05/2020 13:48

Ive got the 10% deposit, and more to cover the respective fees you have to …Ive got the 10% deposit, and more to cover the respective fees you have to pay, which IMO are way to heavily weighted on the buyer! It seems very risky, even with a mortgage in principle can you start a full application (rather than just the mortgage in principle) prior to purchasing?


A mortgage in principle is not suitable for this auction. No lender is going to lend 90% loan to value without a survey and at that ratio it's most certainly not going to be a drive by one. They might pick on hidden problems that will reflect the amount they would be wiling to lend. A cash buyer knows, and takes these risks, You need to look elsewhere unless you were in the position of getting a bridging loan which will give you more time, but will not solve any lender devalution for whatever reason
Edited by: "OllieSt" 8th May
Deal.hunter12308/05/2020 13:46

Tried that tack, but apparently must be done through the auction process …Tried that tack, but apparently must be done through the auction process so would still have 28 days -.- Seems very harsh to me this whole auction malarky!


Auctions are mainly for properties which have already fallen far behind in payments. Hence the payment terms. Not really harsh at all.
Deal.hunter12308/05/2020 13:48

Ive got the 10% deposit, and more to cover the respective fees you have to …Ive got the 10% deposit, and more to cover the respective fees you have to pay, which IMO are way to heavily weighted on the buyer! It seems very risky, even with a mortgage in principle can you start a full application (rather than just the mortgage in principle) prior to purchasing?


Look carefully at the fee's to the company running the auction, some of these can be percentage based with VAT on top and can easily run into thousands
gym.lougar08/05/2020 14:01

House might not be appropriate for mortgage purposes. Whilst you have a …House might not be appropriate for mortgage purposes. Whilst you have a mortgage agreed in principle the lender would need to ensure that any property is good to mortgage.............hence a valuation.The issue with auctions are that you could end up over paying for the property


For the area its a really good price on the surface, a survey would be ideal but the auction doesnt have one
OllieSt08/05/2020 14:13

A mortgage in principle is not suitable for this auction. No lender is …A mortgage in principle is not suitable for this auction. No lender is going to lend 90% loan to value without a survey and at that ratio it's most certainly not going to be a drive by one. They might pick on hidden problems that will reflect the amount they would be wiling to lend. A cash buyer knows, and takes these risks, You need to look elsewhere unless you were in the position of getting a bridging loan which will give you more time, but will not solve any lender devalution for whatever reason


Ive got a higher cash sum ready to go- between 30-40% depending on sale value. Been saving for a long time but unfortunately not enough to be a cash buyer



bozo00708/05/2020 14:35

Auctions are mainly for properties which have already fallen far behind in …Auctions are mainly for properties which have already fallen far behind in payments. Hence the payment terms. Not really harsh at all.


Fair, but from your first time looking in it can seem bewildering!


Think that im going give it a miss, to many pitfalls and not enough ways for it to go right!

Thanks for all your advice everyone!!!
sidhoooooo08/05/2020 15:45

Look carefully at the fee's to the company running the auction, some of …Look carefully at the fee's to the company running the auction, some of these can be percentage based with VAT on top and can easily run into thousands


The fee's are pretty mad to be honest!!!
Can’t you find the owner and offer to buy instead of the auction going ahead?
auctioned property won't suit a traditional mortgage. it is either purchased with cash or a bridging loan. a traditional mortgage lender will not lend you the money to buy an auction property so unless you got the cash or are prepared to pay high interest rates to get a bridging loan, forget about it and move on.

auction properties are for investors.
I’m a financial adviser. 50% of the time auction properties my clients bring to me are unmortgageable. Luckily they are normally individuals with 5-100 other properties they can remortgage to withdraw cash.

The main reason a property is at auction is due to this. The best example I had this year was a property where there was no right of access. You wouldn’t know this from looking, but it meant emergency services couldn’t access the property for example, and you wouldn’t have coverage if you were ill. No mortgage company would touch it.

Do not use a mortgage for an auction property unless you have the cash to cover yourself.

It is particularly terrible advice to try this right now as all mortgage lenders need to value properties. Some are being auto-valued online. Some aren’t. If you fall in to the latter category your application will be put on hold and in that time you’ll lose your auction deposit.

Please please do not do this.
Edited by: "donny1266" 8th May
Also worth noting that the auction advertised price won't be anywhere near what it actually will sell for. Is the house still looking like a bargain if it is 50% more?
Look at prices in your area for past auctions.
Post a letter through the door lol
Most estate agents are telling the sellers to sell through auctions they are in contracts with, I refused
Cant really help much as have never bought through auction, however I think it's clear you probably shouldn't go ahead with any sort of purchase.

I would rather have no house than no house and no money that I had worked hard for.
Edited by: "danboi63" 8th May
Guessing you've just looked at the guide price and thought 'ooh thats cheap'. Yeah, well so have you and 5 other BTL investors, and they'll be prepared to pay more based on their RTI calculations.

Do it properly, OP.
Is it a normal auction or iamsold auction, there are so many different types of auctions and they all are different, that would be your first step to see what type of deposit you would need to put down and if there is a timescale, most of the timescales are unrealistic as conveyancers can be very very lazy, they usually don’t matter too much. Also for auctions I’d recommend setting a maximum price in your head you can afford and are willing to pay and don’t go past that because it can be easy to get carried away.
MrKrabs08/05/2020 19:10

Guessing you've just looked at the guide price and thought 'ooh thats …Guessing you've just looked at the guide price and thought 'ooh thats cheap'. Yeah, well so have you and 5 other BTL investors, and they'll be prepared to pay more based on their RTI calculations.Do it properly, OP.


Actually I have. Watched the item not sell at the last auction guide price and thought that was a bargain but didnt have everything set up by then.

Im also not a BTL investor.

Do it properly, commentor.
GAVINLEWISHUKD08/05/2020 17:34

Also worth noting that the auction advertised price won't be anywhere near …Also worth noting that the auction advertised price won't be anywhere near what it actually will sell for. Is the house still looking like a bargain if it is 50% more?Look at prices in your area for past auctions.


Was amazed to find that this one didnt sell last month when it went to auction at that price. But 50% more is about market price for that area (pre-lockdown)

donny126608/05/2020 17:24

I’m a financial adviser. 50% of the time auction properties my clients b …I’m a financial adviser. 50% of the time auction properties my clients bring to me are unmortgageable. Luckily they are normally individuals with 5-100 other properties they can remortgage to withdraw cash. The main reason a property is at auction is due to this. The best example I had this year was a property where there was no right of access. You wouldn’t know this from looking, but it meant emergency services couldn’t access the property for example, and you wouldn’t have coverage if you were ill. No mortgage company would touch it. Do not use a mortgage for an auction property unless you have the cash to cover yourself.It is particularly terrible advice to try this right now as all mortgage lenders need to value properties. Some are being auto-valued online. Some aren’t. If you fall in to the latter category your application will be put on hold and in that time you’ll lose your auction deposit. Please please do not do this.



Very interesting, is there a database that we can look this up privately? Or does it have to be done through a solicitor/ mortgage advisor like yourself?

Thanks for your input!!


RJ77709/05/2020 01:24

Is it a normal auction or iamsold auction, there are so many different …Is it a normal auction or iamsold auction, there are so many different types of auctions and they all are different, that would be your first step to see what type of deposit you would need to put down and if there is a timescale, most of the timescales are unrealistic as conveyancers can be very very lazy, they usually don’t matter too much. Also for auctions I’d recommend setting a maximum price in your head you can afford and are willing to pay and don’t go past that because it can be easy to get carried away.


Ive got the money for deposit and a significant put down on the mortgage/ cover all of the fees applicable, but if I cant get a mortgage then I cant raise the rest of the funds sadly! Great tip about maximum price.

Misslovely08/05/2020 17:44

Post a letter through the door lol Most estate agents are telling the …Post a letter through the door lol Most estate agents are telling the sellers to sell through auctions they are in contracts with, I refused



Problem is I live in London and the property is not, about 3 hours away by car


kirstie280608/05/2020 17:06

Can’t you find the owner and offer to buy instead of the auction going a …Can’t you find the owner and offer to buy instead of the auction going ahead?


I could find the owner but I honestly dont know how I would go about it without going through the auction documents etc which I dont think is ethically/ legally????? right?
Thanks for all your comments, going to steer clear I think and try to find a property on the normal market and go about the purchase through an estate agents. Like you probably should do for your first house :')
Deal.hunter12309/05/2020 08:21

Was amazed to find that this one didnt sell last month when it went to …Was amazed to find that this one didnt sell last month when it went to auction at that price. But 50% more is about market price for that area (pre-lockdown)Very interesting, is there a database that we can look this up privately? Or does it have to be done through a solicitor/ mortgage advisor like yourself?Thanks for your input!! Ive got the money for deposit and a significant put down on the mortgage/ cover all of the fees applicable, but if I cant get a mortgage then I cant raise the rest of the funds sadly! Great tip about maximum price.Problem is I live in London and the property is not, about 3 hours away by car I could find the owner but I honestly dont know how I would go about it without going through the auction documents etc which I dont think is ethically/ legally????? right?


Do you have a job lined up where this property is? Lenders are unlikely to let you buy a house 3 hours away as it’s not in commutable distance.

regarding the mortgage it’ll need a survey and solicitor searches. Most likely they’ll be put on hold until lockdown restrictions are eased.
donny126609/05/2020 08:23

Do you have a job lined up where this property is? Lenders are unlikely to …Do you have a job lined up where this property is? Lenders are unlikely to let you buy a house 3 hours away as it’s not in commutable distance. regarding the mortgage it’ll need a survey and solicitor searches. Most likely they’ll be put on hold until lockdown restrictions are eased.


Yes I do, Im currently a special needs teacher so could do some supply work for a while at worst

Hopefully soon if we all just follow the rules and stay inside!!! :')
Deal.hunter12309/05/2020 08:27

Yes I do, Im currently a special needs teacher so could do some supply …Yes I do, Im currently a special needs teacher so could do some supply work for a while at worst Hopefully soon if we all just follow the rules and stay inside!!! :')


The lender will ask to see a contract from an employer in the new area btw. Saying you can do supply work wouldn’t cut it. I only know as I was previously a mortgage underwriter after I left uni.

Hopefully you get some free advice before committing to this.
Deal.hunter12309/05/2020 08:21

Was amazed to find that this one didnt sell last month when it went to …Was amazed to find that this one didnt sell last month when it went to auction at that price. But 50% more is about market price for that area (pre-lockdown)

So people who do it as a job looked it over and decided it wasn't worth the risk at even 50% under retail value.
You understand that's a massive red flag right?

I sounds like you haven't seen the property in person so for all you know it's got damp, subsidence and a bunch of other issues which will cost a fortune to fix.
joedastudd09/05/2020 10:19

So people who do it as a job looked it over and decided it wasn't worth …So people who do it as a job looked it over and decided it wasn't worth the risk at even 50% under retail value.You understand that's a massive red flag right?I sounds like you haven't seen the property in person so for all you know it's got damp, subsidence and a bunch of other issues which will cost a fortune to fix.


Ive called it
Deal.hunter12309/05/2020 10:37

Ive called it


I’d steer clear as well, just a heads up but in the future if you want to find out who owns a certain property, you can find out via a simple search on Land Registry for £3
So if you are not going to buy it, post the link to it so people can have a look?
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