Auction Finance
Purchasing a property at auction can be very lucrative and its much more likely that you can pick up a bargain at auction rather than on the open market. The legal pack is already complete, so the legal process is much quicker and you exchange contracts there and then as soon as the hammer goes down.
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Purchasing a property at auction isn't always sunshine and roses though and you need to know a few things before heading to the auction to battle it out.
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Once the hammer goes down, as stated above, you exchange and legally agree to purchase the property. This is great if you have found a genuine bargain, of which there are plenty, but if you haven't done your research and had a solicitor look through the legal pack, you may be on the hook for something you don't realise.
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You will have to pay auction fees as well as either a 5 or 10% deposit as soon as you win the property, there will also be a set deadline date to complete on the purchase, this will usually be 2, 4, 6 or 8 weeks. Once this deadline has passed, if you have failed to complete on the purchase, the vendor can keep your deposit if they want to and re-list the property.
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Now all of that sounds very doom and gloom, but purchasing at auction is a high risk high reward game and has proved over time to be a very effective strategy for property investors.
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If you feel comfortable with this, or if you have won a property at auction and need help with the finance, please submit an enquiry over to us on the form provided and have a play around with the calculator too.
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If you would like to read some FAQs on auction finance, please check out the bottom of the page.
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Auction Finance FAQs
What is 'auction finance'?
Whilst it is possible to complete using a mortgage, its no sure bet. Mortgages are much slower than bridging loans and they also have harsher criteria. This means that the speed and flexibility of bridging finance really shine when it comes to meeting an auction deadline. If you plan on renovating any property, bridging finance will probably be for you, but its best to discuss with a broker.
Do I need a good credit rating to get bridging finance?
Not necessarily, no. Bridging Finance is assessed on the 'exit strategy', which is a finance-y way of saying 'how is the bridge going to be paid off'. Bridging Finance lenders work on a much more common sense basis than mortgage lenders. A bridging finance lender's stance would be: 'If a property is going to sell for an amount comfortably higher than the balance of a bridging loan, why does your credit rating matter?'
If I can get a mortgage in time, will it work out cheaper?
Again, not necessarily no. Whilst the initial instinct when comparing bridging finance to mortgages jumps to bridging finance being more expensive, this is most of the time not the case. The answer to this question depends on what you plan to do with the property and more importantly, when. As a rule of thumb, bridging is expensive to set up and the rate is high, but if the short term nature of bridging allows you to pull some money back out and increases your rental income, bridging usually offers more flexibility and manoeuvrability.