It is a sad fact that many people are unable to get onto the first step of the property ladder due to the high costs involved in buying a house, therefore buying a property at auction and obtaining an auction mortgage has become a very popular alternative for people wanting to get a house at reduced costs. The properties that you will find at auction also can vary greatly, including the more unusual types of buildings such as churches, old schools and barns. You may also be able to get a good price if you are prepared to do some renovation work yourself. Purchasing a property at auction does however have a downside and this is that you are unable to change your mind after the bidding has ended and the hammer has fallen. It is vital that you make completely sure that the property is suitable for your needs and meets your requirements and that you have fully investigated it before you bid because once the sale has finished there is no turning back.
Generally properties that become available at auction are there the due to either bankruptcy, the death of the owner or repossession. Consequently you may be able find yourself a good deal. It is worth remembering that not all properties will be a bargain, and the more competition there is the higher the price will go, so be prepared.
It is wise to arrange an auction mortgage in principal with a bank or building society before buying at auction, so make sure that you plan ahead in advance, as there is a chance that you could lose your deposit if you then fail to complete the transaction within the usual time frame. You should always make sure that you have your finance set in place and agreed with your chosen mortgage lender before going to auction and bidding as you are committed to pay for it once you have successfully bid on the property.
If you leave arranging your auction mortgage too late then you may find that you do not have enough time to successfully organize your finances, so it is imperative that you do not leave this until the last minute. If you fail to meet the 28 day deadline that is often set then you will most likely lose both your deposit and the property. You should also make sure that you consider additional costs such as surveys and legal advice and are prepared for these.
When choosing your auction mortgage, do not just consider how much it will cost now. Think about the future affordability. As mentioned before, consider fees and other associated costs. Is the interest rate on the mortgage for a fixed period of time? Will you be able to take payment holidays should your finances ever change and if they will allow you to pay off more at certain times should you be able to afford it? Any increases that may occur over the time you have your mortgage in interest rates should be taking into consideration, especially if you have taken a variable rate loan, including a discount and tracker loan.
Author Resource:-
Sean Horton is a Director of Enhanced Wealth (http://www.enhancedwealth.co.uk), a whole of market mortgage broker and IFA specializing in mortgage advice and the associated areas of income protection, mortgage protection, mortgage life cover
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