Buying a Property at Auction & Need a Mortgage? – Read our Do’s & Dont’s for Auction Finance

Do:

Your research…

Go to at least one property auction before you intend to purchase, just to see how they work.

Go and view the property you’d like to buy, at least once.

Compare the price and condition of the property to others that are similar that have recently sold or are currently on sale in the street/area. This will help you determine what you think the true market value of the property is and how much you are prepared to bid for it. Websites like Zoopla offer lots of information on previous purchase prices and average prices in the area.

Get a survey/valuation of the property in advance of the sale if this is possible.

Get hold of the Legal Pack and get a solicitor to check it prior to the auction. This pack contains all the information that your solicitor would normally check if you were buying a property in the more conventional way and usually includes key information such as special conditions of sale, title deeds, searches, leases and any legal issues.

Take advice from a mortgage broker or adviser on the suitability of the property for raising a mortgage.

If you can get a mortgage approved on the property prior to the auction or if not get a Mortgage Decision in Principle and an application near ready to submit, before you go into the auction room as you will usually need to complete within 28 days or forfeit your deposit.

Get initial quotes for remedial work if the property needs considerable work. You might be surprised at how much these jobs will cost – better to know up front than after you’ve made your purchase.

Ensure you have sufficient funds available for costs and remedial work if considerable as your mortgage lender will very likely retain part of the mortgage amount until these works are completed.

Have your deposit ready for payment on the day – usually 10% of the hammer price.

Don’t:

Bid on a property at auction that you haven’t seen and looks to be a real bargain in the auction room – there’s probably a reason why no-one else is bidding on it.

Get carried away in the auction room – know your maximum bid before you arrive and don’t get into a bidding war that pushes you beyond this maximum – be prepared to walk away.

Presume you’ll be able to get a mortgage after the event – you may need to shop around or get independent advice. If you can’t pay the balance within 28 days of the auction you will pay hefty interest and possibly forfeit your deposit.

For mortgage advice on short term finance for property auctions visit us here rightmortgageadvice.co.uk

• Guides and tips

Shorter Mortgage Term vs Making Overpayments – The Smart Way to Reduce Costs

Most of us would like to keep the term (length) of our mortgage as short as possible – no-one wants to think of paying a debt up until our old age. Financially it makes good sense to keep the mortgage term as short as possible – the sooner the mortgage is paid off the less interest payable.

However, there are several things to consider before formally committing to the limit of your budget for the sole purpose of keeping the term as short as possible.

The down side to putting everything you have into paying off your mortgage is that it can be difficult to access these funds once paid in and the exercise is often timely and costly as it may involve re-mortgaging.

There are other ways to shorten the term allowing more flexibility that you may wish to consider…

Most mortgage products have overpayment facilities that allow you to make regular overpayments that will in effect reduce the term of the mortgage. There can be several benefits to this kind of arrangement.

Providing the chosen mortgage product has a regular overpayment facility then you can make overpayments that will in effect reduce the term of the mortgage and the amount you will pay in interest but if you find yourself short of money you aren’t obliged to make the higher payment.

If the product has the added benefit of a draw-down, you may also be able to draw from these overpaid funds if you find yourself in need of a cash injection. An offset facility could be a good alternative as well with the same kind of benefits.

Making regular overpayments is key to ensuring that the term is reduced. If you are not good at managing your money then perhaps this route is not the best for you.

Rather than committing all of your savings to reduce the term of your mortgage, it is good financial practice to keep a ‘rainy day’ fund that you can draw from if the worst happens, without affecting your mortgage payments and ultimately risking your home.

So in today’s unpredictable climate thinking outside the box can give you exactly the same effect as paying as much off your mortgage as possible without the risk of finding the barrel empty if the unexpected happens.

For more advice on mortgages or to speak to an adviser you can contact us on 0845 4594490.

• Guides and tips