The Advantages Of Property Auction Finance

The property & financial markets move quickly, & opportunities come & go in the blink of eye, making it difficult for landlords, home buyers & property investors to buy their dream home or expand their portfolio. 

This is compounded by the added complexities of buying a property at auction, wherein buyers are required to complete the purchase of properties won within 28 days. Buying a property at auction has many advantages though, most properties sold in this way are offered at bargain prices that allow buyers to get a great investment opportunity for an affordable outlay. 

When it comes to financing properties bought at auction, the best way to secure funds for landlords & property investors alike is by using property auction finance.

Key Benefits Of Using Bridging Loans For Auction Properties

In comparison with other types of finance, auction bridging loans have many benefits. There are many reasons that a borrower may choose a bridging loan over a more traditional form of financing. These include:

Property Auction Finance Is Fast To Arrange

Traditional loans such as business loans, commercial & residential mortgages, often take weeks or even months to arrange. Auction finance can be arranged & wired to a bank account in as little as 48 hours, & often an agreement-in-principle happens within 24 hours.

Although these loans typically have higher interest rates than other forms of lending because the repayment terms are so short (usually around 3-24 months), they often work out to be the most cost-effective form of borrowing. 

Property Auction Finance Is Flexible

Auction finance loans have more flexible lending criteria than other types of funding, meaning that they can be approved & transferred to the borrower within a very short space of time.

Where traditional loan application processes are concerned with borrowers credit histories, income & loan affordability, auction finance lenders are more interested in the value of the property you are purchasing & seeing you have a solid exit strategy (how you plan to repay the loan). This offers buyers more opportunity to create their own favourable conditions for borrowing. 

They can also be secured on all types of properties - including those that other lenders will not offer lines of credit on.

We arrange loans with interest rates from as low as 0.44%. To see the bridging loan rates we can offer you then please use our bridging loan calculator.

How Bridging Loans Help You Buy Your Next Auction Property

An auction bridging loan is frequently used to buy property at auction specifically because they can be set up so quickly (usually within 3 - 7 days) & are available for sums that range from as low as £25k up to £25m or more. 

When buying property at auction, 10% of the total property price is required as a deposit on the day of the auction, as soon as the buyer places their winning bid. The buyer then has 28 days to complete the purchase, or they risk losing both the property & their deposit.

Traditional mortgages tend to take substantially longer to arrange than property auction finance, meaning that they are often unsuitable for this type of purchase. A bridging loan is therefore usually used to literally ‘bridge the gap’ between when the purchase funds are needed & the time it takes to arrange a long-term mortgage. 

Once this mortgage is arranged, the buyer can use this funding to pay back the auction bridging loan.

How Is Property Auction Finance Arranged?

As mentioned above, bridge loans need to be completed within a short space of time, meaning that lenders must work quickly to decide whether or not a borrowers application for funds can be approved. 

Bridge loans lenders will assess the viability of each application on a case by case basis, considering factors such as:

• How much the buyer wants to borrow against the property
• What the buyer’s long-term plan is, with regards to developing & renovating the property
• How suitable the property is for the purpose assigned by the buyer
• How much building work is required to make the property fit-for-purpose (a lender may allocate further funds towards redevelopment, that will be drawn down at various stages of the works)
• What repayment structure is best suited to the project (rolling up interest & fees to the final repayment, for example)
• The buyer’s exit strategy

An exit strategy refers to the plan the buyer has to pay off the lump sum due at the end of the repayment term. This may include selling the property on or refinancing with a mortgage.

What Types Of Properties Can You Obtain Auction Financing For?

Auction finance can be secured against almost every type of property, which is not the case with traditional lending. 

A property auction finance loan can be secured against:

• Houses
• Flats
• Maisonettes
• Shops
• Mixed-use properties (shops with residential space above, for example)
• Commercial properties
• Farms
• Land
• Care homes
• Building plots
• Leisure complexes

Property can also be freehold or leasehold.

Non-Standard Properties

Another benefit with property auction finance is that it can be used to secure non-standard properties, such as those with unusual construction, or those that are in poor condition or even derelict. 

The majority of mainstream mortgage lenders will not provide finance against a property that is considered non-standard or that requires extensive work to be considered fit-for-purpose.

Multiple Properties

Auction finance can use more than one property as security, on a first or second charge basis, or even a combination of the two.

This means that to gain access to the full amount you need to borrow, you could arrange auction finance that utilises a first charge on the property that you are buying, & a second charge on your existing property, as long as the mortgage has equity available.

We're The Property Auction Finance Specialists

Each lender has their own criteria for lending, & a good broker know this. Instead of putting multiple applications to a random pick of lenders, some of whom would never consider your application as it would be outside their lending criteria, a broker knows that to ensure you have the best chance of getting your loan at the best rate, your application needs to go to the right lenders & be presented in the right way.

We can help you to secure funds for auction properties, working as an experienced broker with access to a wide range of specialist lenders across the entire market. 

In most cases we are able to negotiate a same day agreement-in-principle that allows you to head to auction with a firm idea of how much you are able to bid. We arrange loans that range from £25k to £25m & you will have access to the entire financial market, including a number of exclusive products.

We offer auction finance uk wide, with expert support throughout the process, so that even if you are brand new to the property auction business, you’re in safe hands.

Save time, save money & get super-fast help securing your commercial bridging finance by using our auction finance calculator or calling us on 01202 612934.