Buying a property at auction can be a great way to cut out the lengthy process associated with buying a house - without the solicitors and surveyors. Once the hammer falls, the contract is signed and a non-refundable deposit is put down on the day. The sale is completed within 28 days.
Until a more permanent form of repayment is in place, such as a mortgage, you will need finance to secure the property. As money might not be readily available, auction finance is a quick way to bridge the gap, especially if money is tied up in other ventures. The popularity of auction finance is due to the speed in which it can be accessed.
Bridging loans are the most common form of auction finance, although there are other types available. The loan can be used to finance the entire price of the property, the deposit, or the balance.
Points to consider for Auction Finance:
- While auction finance can be secured after the auction room sale, it's advisable to secure the finance beforehand to lessen the risk. This also allows you to work within your agreed budget at the point of sale.
- If you're using bridging finance, rates tend to be a lot higher than traditional mortgages. However, as the loans are short term, they remain the most ideal way for investors to secure property finance and take advantage of deals they wouldn't be able to otherwise. This type of finance is suitable for commercial, mixed-use properties, land, and residential properties.
- Auction finance rates change all the time. Get in touch with an adviser today to find out what the latest rates are.
How auction finance works
1. Firstly, find a property you'd like to buy. Then, tell the lender it's what you intend to purchase. It's important to find the right lender, as some will be more suitable than others depending on your circumstances. Revolution Brokers are specialist mortgage advisors who can match you with the right lender to meet your needs.
2. Once you're matched with the ideal lender, they will assess you for suitability. The lender will want a property valuation and will want to see proof of your earnings, credit rating and financial history. There is help for individuals with less than perfect credit, so don't be put off.
3. When the lender approves the finance, you'll need to budget for the property. The loan could be for part or all of the property. A specialist adviser will tell you the percentage you are able to borrow, and how much you'll need to offer upfront.
4. Once you've won the property at auction, you'll need to put the deposit, which is usually 10% but can be more, depending on the terms of the sale. You'll then have 28 days to complete the sale. Your lender will then release your funds to the vendor's solicitor and the deal is complete!
If you're thinking of buying a property at auction, get in touch with Revolution Brokers today for expert advice.