Tips for buying a home at auction

Tips for buying a home at auction

Forget The Block, auctions are a lot less glamorous and much more stressful when you’re the one holding the bidding paddle. If you are organised, have your home loan pre-approved, know what you are looking for and know your budget and won’t go over it, then perhaps an auction could be the place you land your dream home or investment.

Here’s some hot tips to help you prepare for an auction;

Before the auction

  • Finances. Have the funds ready to go by arranging pre-approval of your finances before the actual auction. That way if you win and you need to write a deposit cheque you will be armed and ready. Make sure you get pre-approval at least two to four weeks before the auction.
  • Compare home loans online. Your home loan will determine how much you ultimately pay on a home. Don’t let bad interest rates override any savings you made on auction day. Shop around for the best home loan prior to the auction by comparing some of Australia’s best home loans
  • Experience. Practice makes perfect. Attend a few auctions before you go to your own so that you understand how they work and look at bidding strategies people adopt.
  • Set yourself a limit. This isn’t a shoe sale where one can get a little carried away. You are buying a home so remember that. Try not to get too emotionally attached and always remember your limit. To get an idea of what price the vendor may have in mind, do you research and look at the prices of property for sale in the area you are considering.
  • Changes to contract. If you require any amendments to the contract, make sure you speak to the estate agent beforehand and ask for this in writing. That way if you win the bidding everything is clear and straightforward and both parties are ready.

On auction day

  • Arrive early. Eagerness often gets rewarded. Biddings can be intense so getting there early, finding a good spot and giving yourself plenty of time will make the whole experience less so.
  • Start low. Don’t peak too soon. It’s easy to get carried away but it’s much better financially if you start off controlled and start the bidding low. You need to have somewhere to go after all.
  • Confidence. Act like you know what you are doing, even if you don’t. When bidding, say it fast and try not to hesitate as sometimes this can appear as a sign of weakness and panic to the other bidders. Also try to remain unemotional as this could be used against you.

Finally if you are outbid, keep trying as it could mean there is something better around the corner. Buying a home at auction can be fun and exhilarating so get in on the action if you are in the market for a new home.

Check out today’s home loan deals by using the RateCity home loan comparison tool. Want to work out your repayments? Use the home loan repayment calculator.

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What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

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What does going guarantor' mean?

Going guarantor means a person offers up the equity in their home as security for your loan. This is a serious commitment which can have major repercussions if the person is not able to make their repayments and defaults on their loan. In this scenario, the bank will legally be able to the guarantor until the debt is settled.

Not everyone can be a guarantor. Lenders will generally only allow immediate family members to act as a guarantor but this can sometimes be stretched to include extended family depending on the circumstances.

What is the amortisation period?

Popularly known as the loan term, the amortisation period is the time over which the borrower must pay back both the loan’s principal and interest. It is usually determined during the application approval process.

What is the ratings scale?

The ratings are between 0 and 5, shown to one decimal point, with 5.0 as the best. The ratings should be used as an easy guide rather than the only thing you consider. For example, a product with a rating of 4.7 may or may not be better suited to your needs than one with a rating of 4.5, but both are probably much better than one with a rating of 1.2.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

Do other comparison sites offer the same service?

Real Time RatingsTM is the only online system that ranks the home loan market based on your personal borrowing preferences. Until now, home loans have been rated based on outdated data. Our system is unique because it reacts to changes as soon as we update our database.

What is appreciation or depreciation of property?

The increase or decrease in the value of a property due to factors including inflation, demand and political stability.

What factors does Real Time Ratings consider?

Real Time RatingsTM uses a range of information to provide personalised results:

  • Your loan amount
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  • Your loan-to-value ratio (LVR)
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Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

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How does a redraw facility work?

A redraw facility attached to your loan allows you to borrow back any additional repayments that you have already paid on your loan. This can be a beneficial feature because, by paying down the principal with additional repayments, you will be charged less interest. However you will still be able to access the extra money when needed.