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Bridging Loans for Auction Finance

Bridging loans for auction finance explained:
In an Auction room, as soon as the gavel falls you are legally bound to purchase the property. For that reason, you need to have arranged your finance in advance as a 10% deposit is required on the day.

The final 90% must then be paid within 28 days. If you fail to complete the purchase on time, you could be faced with hefty fees and may lose your deposit.

Auction Bridging loans are fast and offer no monthly payments, as the interest is rolled-up into the loan; however, having an exit strategy is a must.

Bridging loans are an interim financing solution that can provide fast funding solutions to meet auction deadlines to those that are Buying a property at Auction.

Auction Bridging loans avoid all the usual lengthy procedures that a normal purchase involves; there’s less risk and disappointment of everything falling through at the last minute

If you require finance for your Auction property, you must speak to an experienced and specialised broker who knows the market, as expertise and timekeeping are key.

Key Features: Auction Finance Loan
  • Typical interest rates and fees – Call our advisers
  • Auction Bridging Loans from £100,000 to £50 million; subject to affordability and credit criteria
  • Loan to values up to 75% (100% with cross charges)
  • Mortgage Term: 1 to 2 years
  • Payments: interest only / capital repayment / part capital / interest compounded / rolled or retained (no monthly payments)
  • Purchase
  • No minimum outside income / All income types
  • No max of number of rooms / units (X to XX)
  • No max of number of tenancies
  • All credit histories: High Net Worth to Credit Repair
  • All applicant types: Individuals / Corporate (Ltd Co’s) / SSAS etc
  • All tenures: Freehold / Leasehold (no minimum term)
  • All residential tenants: Working, Students, LHA benefits
  • All residential tenancies: AST to Corporate Leases
  • All business tenants: No restrictions on industry/sector
  • All business tenancies: Fully repairing leases / Licences
  • EPC-enhanced products available

Auction Bridging Finance Loan

On the day of the Auction, you will need a 10% deposit; providing the further 90% within 28 days, so you’ll need to have an agreement in principle from a lender ready. 

We have arranged Bridging finance for Auction properties for many customers; we can create a bespoke illustration for you and arrange for the Agreement in Principle from the lender.

A Bridging loan is used for an Auction purchase, as these loans can typically complete within 4 weeks; they are fast, flexible short-term loans.

You must have an exit strategy when taking out a bridging loan; whether this be to refinance the property or to sell it.

Arranging finance for an Auction property

We have experienced Advisers who are happy to help with any queries you may have on financing your Auction purchase. We don’t charge any upfront fees, so speaking to us will cost you nothing!

FAQs

There certainly are! We have some Auction articles that were written by our experienced team of property finance advisers. Click here to read.

The typical fees are:

  • Broker fees – some mortgage brokers can charge pretty hefty fees.
  • Lenders arrangement fees – these can vary significantly and need to be carefully reviewed. In some cases, there may not be a fee, but the minimum term is longer.
  • Interest rates – some lenders charge an ‘introductory’ interest rate, which can be as low as 0.75%, which doubles after 6 months. Or the interest rate may be 0.75% however, there is also a management fee of 0.75% making the true cost 1.5%.
  • Exit fees – lenders charge interest by a daily or monthly basis. This means should you wish to come out of the deal, the fees are considerably more than going with a lender that charges interest on a daily basis.

There is no minimum term but some lenders do have a minimum interest charge of 1 month, so you can settle the loan at any point but pay 1 month of interest.

The maximum term offered by some lenders is 24 months.

We would recommend taking a longer term loan, as you only pay interest on the months you have the loan for.

Auction Bridging loans can  complete within 4 weeks. Advocate Finance and the lenders we work with are very fast so the completion timings are done to the speed of the solicitors, this is why it is important to instruct a solicitor that can work efficiently and you explain to them the deadlines upfront before agreeing to work with them. 

Bridging loans can be from £50,000 to £5 Million.

A 10% deposit is required and you will be expected to provide this on the day, so be ready for that.

The interest rates depend on the amount of the loan and the loan to value (LTV) being requested.

The loan to value represents the risk to the lender; the lower this is, the lower the interest rates.

The interest of the loan is compounded month on month and added to the total facility. You only pay interest on the months you have the loan for.

The repayment of the loan can be by any funds that can be raised. The normal situation is that the sale proceeds from the house being sold are used to repay the bridging loan, plus any interest accrued in that time.

Yes, you can. Depending on the complexity of the property/project, you may need to provide experience or add a co-applicant who has experience in property development. 
There are lenders who will offer an auction bridging loan on simple properties for first-time developers/landlords; speak to one of our team today for more information.

Our advisers offer a free consultation, so please give us a call or use the “Get in Touch With Us” form at the end of this page

Advantages of Auction Finance

  • Fast, short-term loans
  • No monthly payments
  • Auction purchases can be very exciting and has the potential to be very profitable.
 

Disadvantages of Auction Finance

  • Can be large fees if the purchase does not complete on time

How can YOU benefit from our advice?

  • If speed is essential to the transaction, our advisers will prioritise your case to ensure deadlines are met.
  • Our Advisers have expert knowledge when it comes to Auction Bridging Loans.
  • We offer a FREE assessment and have a NO upfront fee policy. Our typical fee for 99% of our clients is capped at £395.
  • Want to read what our customers say? Read our testimonialsGoogle reviews.