Property purchases at auction have a quick turnaround, usually 28 days, so you need to be ready with the funding. Fast to arrange and giving you quick access to the funds, auction finance provides you with the flexibility and speed that you need as an auction buyer.
What is auction finance?
Auction finance is a type of bridging loan that enables you to buy a property at auction. It’s specifically designed for an auction purchase, which is a quick process. In the first instance, when you’ve won the bid, you have to pay a deposit, which is usually 10% of the purchase price. This needs to be done on the day of the auction. Then, the purchase usually has to complete within 28 days, at which point the balance is payable.
How does auction finance work?
As a short-term loan, auction finance ensures that you can buy the property you want without having a long-term financing solution in place. For example, you may have applied for a mortgage but, as this takes time to process, it’s not adequate for the sake of an auction process. Therefore, you can use auction finance to buy the property in the meantime. Or you may have purchased a property to renovate with the intention of selling it for profit, repaying your auction loan at that point. Auction loans can typically be taken out for 1 to 24 months, although longer terms are available.
Unlike a mortgage, you don’t usually need to make any monthly repayments for auction finance. Instead, the loan is repaid at the end of the term. The loan is secured against the property you’re buying or another asset and you need to have an exit strategy, which is how you intend to repay the loan. Your exit strategy may be to sell the property or a different asset, for example, or to switch to a mortgage. These factors mean that the application process is a lot easier than applying for other types of finance. The approval time for auction finance is swift and you benefit from quick access to the funds.
By arranging your auction finance in advance, you can confidently bid on a property knowing that you have the funds ready to pay the deposit on the day and then complete on your purchase within the short time frame.
What types of properties can you buy with auction finance?
Auction finance is extremely flexible in its uses. It can be used to buy residential, commercial and mixed-use properties as well as land for development or farming. Examples of the types of properties sold at auctions include:
- Single-unit residential properties, such as houses and flats
- Investment residential properties, such as HMOs and buy-to-lets, including tenanted properties
- Multi-unit freehold blocks (MUFBs)
- Properties that need renovation
- Unmortgageable properties
- Retail units
- Hotels, guesthouses and pubs
- Care homes
- Leisure centres
- Industrial units
- Land for development, with or without planning
- Unique structures, such as windmills, barns, castles and converted churches
- Properties with structural issues, short leases or legal issues, including bad titles and arrears
Auction finance provides fast and flexible funding
Auctions offer numerous benefits when it comes to buying property. Properties are generally priced below their market values, enabling you to get a bargain deal. You can check the legal pack before the auction starts so that you’re fully aware of any implications, helping you to decide whether or not to bid on a particular property. The completion timescale is fast and there’s no risk of being gazumped. You can also find properties at auctions that you wouldn’t generally find on the open market.
With flexible eligibility criteria, auction finance is quick to arrange so you won’t miss out on an opportunity. It removes the barrier of trying to secure funds in the short auction completion timescale. You can also use it to buy a property that a lender wouldn’t approve a mortgage for, such as one that’s deemed uninhabitable. Whether this is your first auction purchase or you’re a seasoned pro, we can arrange your auction finance. Just give us a call on 01322 907 000 to put the funds you need in place.