Your property queries answered

Will a cheque do at auction?

I understand that when you buy at auction you have to hand over 10 per cent of the purchase price of the house. Who is it given to and will a personal cheque do? More importantly, as the houses we are going for are in the region of €500,000 and we will probably be buying before we sell, how do we fund the deposit?

There is no point going to an auction unless you can hand over a cheque for 10 per cent of the purchase price there and then. What happens is that, directly after the auction you (or your solicitor) are brought into a room with the vendor's solicitor. Legal documents are signed committing you to going through with the sale and you give the vendor's solicitor a non-refundable 10 per cent deposit. This can be a bank draft or a personal cheque. If your solicitor is bidding on your behalf and he or she agrees, then your solicitor's company cheque will also do. The cheque is made out to the vendor's solicitor. As auction guidelines are notoriously unreliable, your best bet is to get a draft for (or budget for) writing a cheque for 10 per cent of your own limit - not the guide price. If it turns out that you are a few thousand euro short of the 10 per cent, don't worry, it's unlikely that the other side's solicitor will quibble.

As for funding the deposit, it gets back to your pre-auction preparation. You are trading up so don't go to an auction unless you have mortgage approval for your new and presumably larger mortgage. There have been cases of people going to auction on impulse, writing a cheque for the deposit and then finding that their bank manager isn't as sympathetic as they thought - non-completion of an auction sale is legally complicated and very expensive. If you can't fund the deposit out of savings, then a short term bank loan is your next likely option - you'll be able to pay it off when your house is sold.

Should I get a mortgage abroad?

In 2004 I intend to buy an apartment in a resort area in either Portugal or Spain as a part-holiday home/part-investment. I have equity in my own house and that is one way of funding the purchase but a friend suggested that I get a foreign mortgage. Is there any reason why that's a better option?

The main reason why an increasing number of people are looking at getting a mortgage in the country where they are buying is to keep their financial affairs separate. Remortgaging a family home is not a decision that should be taken lightly - if you default on your payments you are at risk of losing your home. It's one thing losing a holiday apartment, quite another to lose your home. That is of course a worse case scenario. Some buyers simply want to keep their affairs separate, especially if they are renting out the apartment or house. For people who have a lot of equity stored up in their own homes - and that really applies to anyone who has owned their own house for around 10 years - remortgaging is a relatively easy and quick option. Getting a mortgage in Spain or Portugal can take longer - in some cases up to three months. Also you'll need to put together a good deal of documentation, from bank statements to proof of earnings. In addition these foreign mortgages are unlikely to be more than 75 per cent of the purchase price so you should be prepared to have a sizeable deposit.

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Unfortunately, it is not possible to respond to all questions. The above is a representative sample of queries received. This column is a readers' service and is not intended to replace professional advice. No individual correspondence will be entered into.