11th April 2025

Can you mortgage an auction property?

More and more people are turning to auctions to buy and sell property, and because getting onto the property ladder can be quite challenging with increased housing costs, most people require a mortgage to finance their purchase. As such, this begs the question – can you get a mortgage for an auction property?

The good news is yes, it is possible to get a mortgage for an auction property. However, this is not without some caveats and a bit more time pressure than when buying through an estate agent. With that being said, auction properties can often allow you to purchase the property of your dreams for a much better price, so it’s an option that is worth looking into. To learn more about the process, keep reading as we discuss these caveats and next steps to securing a mortgage deal for your auction property.

What would make an auction property unmortgageable?

Firstly, it’s important to know that, whilst property auctions feature a wide range of lot types, ranging from ready-to-move-in houses to renovation properties, not all of these will be deemed mortgageable by lenders. There are a number of criteria that properties must meet in order to qualify for a mortgage. For example, if your desired property does not have a functioning bathroom or a working kitchen, you will not be able to secure an offer from a lender. Additionally, they aren’t likely to give you an offer if the property has wet or dry rot, or is home to invasive plant species that can damage the property – such as Japanese Knotweed. Other factors that can affect your ability to secure a mortgage include: 

• Properties with any kind of structural defects or issues
• Properties that are close to mining areas, landfill, or at risk of flooding
• Leasehold properties with too short a lease, for example less than 70 years remaining
• Derelict property or even if part of the building is in complete disrepair
• Properties of non-standard construction.

If you’re an investor, it’s also worth noting that properties with a tenant in situ may also not be mortgageable, but this is at the discretion of the bank or lender. A good rule to abide by when looking at potential purchases is to make sure that the property is both immediately liveable or lettable and is either freehold or has a long leasehold. It is recommended that you have the property surveyed to avoid any extra repair costs after purchasing, and check with lenders directly if you are planning to buy a property with a sitting tenant. 

How to buy a house at auction with a mortgage

Buying a property by auction with a mortgage works in a slightly different way to buying with a mortgage on the open market. This is because the full cost of the auction must be paid within a certain time period depending on if you have a conditional or unconditional sale. 

As a mortgage can take 2-6 weeks to be arranged, it’s important to look at both of these options and how they could impact your purchase. If you are buying a property under unconditional terms, you’ll need to pay a 10% deposit immediately upon your winning bid being accepted. You’ll then have to pay the remaining balance usually within 30 days unless stated otherwise. If you cannot, you risk losing the deposit you paid and may be liable to pay the full cost as well as the bill for the resale of the property at another auction.

For this reason, we wouldn’t recommend trying to buy a property under unconditional terms with a mortgage. This turnaround time is very tight for lenders to arrange a mortgage deal, meaning that cash buyers are more suited to this type of sale. With that being said, if you have your heart set on a particular property, you may still be able to get a bridge loan to cover the upfront costs – though this will have significantly higher interest rates than a regular mortgage so you must be cautious if doing this and remember this should be a short-term option only.

The other option is a conditional auction sale which is typically the better option when looking to buy an auction property with a mortgage, as the completion time is longer than an unconditional sale. In this case you will be granted an exclusivity period of 60 days to purchase the property (unless otherwise specified in the legal pack).

During this 60-day period, the seller can not accept any other offer. This will give you an advantage over cash buyers. You’ll also have some extra time to carry out a survey, secure your mortgage offer and complete administration work. If you fail to complete the sale within 60 days, you are likely to lose your reservation fee and could be subject to legal action.

What if the lender can’t meet the deadline or I can’t get a mortgage in time?

As mentioned above, if a mortgage lender can’t release the necessary funds within the time allotted, you can take out a short-term bridging loan to cover the upfront costs until your mortgage is arranged. Bridging loans are a viable option because they only take up to 10 days to complete, but they may not financially be the best option as they have high interest rates. We would only recommend this option if you have your heart set on a particular property, and you have the financial position to support taking out a short term loan. You will need to research the financial options available to you if you are concerned about securing a mortgage for your desired lot.

At SDL Property Auctions, we partner with Together Finance who specialise in mortgages and loans designed with property auctions in mind, and they can help you to arrange short term finance if this is the route you wish to take. Contact them via our auction finance page to find out more.

Finally, you must remember that a lender will only give you the agreed amount. If at auction the bidding goes beyond what the bank is prepared to lend, you will be expected to pay the difference if you win. The bank will base their lending decision on the estimated value of the property, so you will need to take this into account when deciding your highest bid.

What other costs are there to consider?

Of course, it isn’t just the bidding, deposit, and mortgage to consider when looking at your finances. You’ll have to think about solicitor fees, costs of surveys, stamp duty land tax, and any other fees that could be listed in the legal pack. If you can, we’d recommend picking a solicitor and mortgage broker that is accustomed to dealing with auction purchases to ensure everything can be handled within the allotted time frames. Often, you’ll find that these mortgage brokers can recommend surveyors who will also be able to work quickly to ensure the process goes smoothly. 

Can the bank withdraw their offer?

It is not likely, but it is possible as the decision in principle isn’t a guarantee. This is why many buyers tend to consult specialist lenders for auction purchases, as these agreements are based on an initial application which has fewer details about the property and your financial situation.

Once your final application is submitted, underwriters will assess the risk profile in more detail – if they find that the property has a problem they weren’t aware of, or something on your credit rating pops up – they can withdraw their offer. With that being said, this is quite rare as finance specialists are usually quite diligent in their checks and will be able to make a decision quickly to reduce the risk of a deal falling through.

What if I want to buy a property to renovate, can I still get a mortgage?

If you’re buying a property to renovate, you’ll only be able to get a mortgage if it’s currently liveable. For example, if you’re buying a complete property with a working kitchen and bathroom and no major defects, you’ll be able to secure a mortgage and renovate it as you see fit. However, you won’t be able to get a mortgage on a lot that needs extensive renovation or significant structural repair. This is true for both auction and estate agent purchases.

If you have found your ideal property at auction and it doesn’t meet the conditions required to make it mortgageable, then the best remaining option you have will be to buy with cash or take out a commercial loan to complete the repair works and cover upfront costs. Once the property is deemed habitable and mortgageable, you can then take out a mortgage on the property if you wish. This method will require extra budgeting to ensure you can finance the project as these loans will have a high-interest rate and should be kept as a short-term option only.

Get auction ready with SDL Property Auctions

If you’re looking to purchase a property by auction with a mortgage, then you should start to make the necessary arrangements. You’ll need to browse through the catalogue for your chosen auction date, which is typically released one month before the event and select a property you want to bid on. Allow yourself time to view the properties in person, and get the ball rolling in securing a decision in principle from your lender. You will also need to make sure any other relevant finances are in place, such as your deposit, and have a plan in place if bidding goes higher than expected or if your lender cannot complete the offer in time.