Property auctions are packed with incredible investment opportunities, where homes go under the hammer for far less than their true market value. From first-time buyers to established property investors, people from all backgrounds flock to property auctions with bargains in mind.
Unfortunately, the way auction property sales work presents a major problem for many would-be buyers. When the hammer goes down, the winning bidder is expected to pay a deposit of 10% of the lot’s value right away. Not the end of the world, given how the deposit on a conventional mortgage can be as high as 20% or even 25%.
With auction property purchases, the problem lies in the fact that the full balance needs to be repaid within 28 days. As the average mortgage completion time in the UK is currently around three months, conventional High Street funding is out of the question.
Established investors, therefore, enjoy an advantage at property auctions – many of which have the on-hand capital needed to purchase homes for cash.
Does this mean that everyone else is counted out of the running, or is there a viable funding solution available for auction property purchases?
How to Fund Buying a House at Auction
One of the simplest and most affordable ways to purchase a property at auction is by taking out a bridging loan. Bridging finance can be arranged within a few working days, making it ideal for time-critical purchase and investment opportunities.
A bridging loan is essentially a short-term mortgage, secured against assets of value in the same way as a conventional home loan. However, bridging finance is significantly more flexible than a traditional mortgage, with fewer restrictions and far more relaxed lending criteria.
Eligibility for bridging finance is determined almost entirely on the basis of two things:
- The applicant’s ability to provide assets of value as security to cover the costs of the loan
- Evidence of a workable exit strategy to repay the full balance of the loan on time
Bridging loans for auction property purchases can even be taken out by those with poor credit or a history of bankruptcy.
Your credit history and current financial position will be taken into account, as a standard part of the application process. But rather than ‘binary’ factors that determine an applicant’s eligibility, they are more likely to affect the affordability of your loan.
Independent Broker Support
Given the time-critical nature of auction property purchases, it is advisable to seek pre-approval from an appropriate lender in advance. This is where independent broker support can prove invaluable, enabling you to establish your eligibility for bridging finance and approach the right lenders with your requests for funding.
Bridging finance is just one of many viable funding solutions for auction property purchases. Your broker will advise on the most appropriate and cost-effective product to suit your requirements, negotiating on your behalf to ensure you get an unbeatable deal.
For more information on auction property purchases or to discuss the benefits of bridging finance in more detail, contact a member of the team at UK Property Finance today.
Craig Upton supports UK businesses by increasing sales growth using various revenue streams online. Creating strategic partnerships and keen focus to detail, Craig equips websites with the right tools to increase traffic. Craig is also the CEO of iCONQUER, a UK based SEO Firm and has been working in the digital marketing arena for over a decade. A trusted SEO consultant and trainer, Craig has worked with British brands such as FT.com, DJKit, UK Property Finance, Serimax and also supported UK doctors, solicitors, builders, jewellers, to mention a few, gain more exposure online. Craig has gained a wealth of knowledge within the digital marketing space and is committed to creating new opportunities working with UK companies.