Financing a property bought at auction is about teaming with a lender who can move fast and complete the purchase within 28 days of the winning bid. Banks and building societies often cannot react quickly enough to fund a property buy from auction. Auction finance is simply a wrapper for a bridging loan.
These lenders can adapt the lending package to meet the project requirements. Often a property bought at auction is not in a state for a bank or building society to consider a standard loan. The property might have structural problems or need an extensive refurbishment before anyone can move in. Auction finance is ideal for this purpose.
The lender can often arrange a funding package within a week or so; and certainly within the 28 day auction house deadline. If the property is not sufficient security, then other property can be brought in to the equation.
Buying at auction means putting down a 10% cash deposit after the bid is accepted; so total funding is 90% of the value of the winning bid. Because speed is of the essence, the lender will need an independent valuation as soon after the auction ends as possible.
Other costs include booking and arrangement fees. Lenders who will fund an auction property purchase do not publish their rates as packages are tailored for each project. Nevertheless, expect to pay about 3% above the lender’s base rate. If more money is needed to refurbish an auction property, lenders are generally flexible enough to advance the extra money, although more security may be required.
Auction finance is closed bridging, so the lender will want to lend over a fixed term of up to 24 months with the full loan repaid at the end of the period. This kind of borrowing gives a breathing space for to anyone buying at auction to secure and prepare the property for sale to pay off the mortgage or refinance by another lender like a bank or building society with a cheaper, longer term loan.My Property Hub has teamed up with XXXX to provide competitive auction finance. To find out more click here or fill-in our online contact form and we’ll get back to you.