Jigar Modi

Home / Questions

First home questions

Should I bid over my limit at auction if family offers to cover it?

By Jigar Modi, over 15 years in lending

The short answer

Be very careful. Going over your limit can change more than the price. It can affect whether a government scheme still applies, whether you pay LMI and whether a lender will still support the loan. Property bought at auction usually has no cooling-off period, so you're committed when the hammer falls.

"It's only $5,000. We'll give it to you."

A family with two young kids and years of savings. Their pre-approval came on a Friday. The auction was the next day. Their limit was set by a cap on a government scheme.

On the day, family offered to cover the difference. Going over felt like the smallest decision of the day.

They bought $5,000 over the cap. That cost them the scheme and brought in LMI. For two weeks, no lender would support the loan. It was an auction, so there was no cooling-off period to fall back on.

It settled. I lay awake anyway.

The question nobody had asked beforehand was simple. What happens if you go over on the day?

Questions to ask before auction day

  • What exactly sets your limit? Your pre-approval, a scheme cap, a valuation or your own budget?
  • What happens to your loan, any LMI and any scheme if you go one dollar over?
  • If family helps, is it a gift or a loan, and will the lender accept it?
  • What if the valuation comes in under the price you pay?
  • Who will stand next to you and stop you at your walk-away number?

Agree your walk-away number before you arrive, with the person who'll hold you to it. On the day, emotions are loud.

Read more about auctions and cooling-off periods in the glossary. Rules vary by state, so check what applies where you're buying.

Jigar Modi

About Jigar Modi

I came to Australia in 2000 as a student with $850. I've worked inside two major banks and spent over 10 years in mortgage broking. That's over 15 years in lending, and more than $450M in settled lending.

Founder of First Home Ready. I help Indian professionals and families avoid costly financial mistakes before they sign. Read my story

Related questions

Got a question you'd like answered? Email jigar@jigarmodi.com.au. I read every one, and the best ones become pages like this.

This is general information, not personal advice. Rules change, so check what applies to you now.