Our auction property bridging loans are a fast finance solution for when buying your next property at auction. We arrange loans for Buy To Lets (BTLs), residential, mixed-use, commercial, agricultural property & land purchases.
We act fast, with instant decisions and can facilitate auction bridging finance for properties within your 28 day deadline.
|Loan to value (LTV)||80% maximum|
|Loan term||1 to 24 months|
|Loan amount||£26,000 up to £250m|
|Interest options||Rolled-up, retained or serviced|
|Interest rates||From 0.44%|
|Decision||Immediate decision in principle|
|Completion||Up to £200k in 3 days
Up to £250m in under 2 weeks
|Early repayment fees||None|
|Availability||Secured on assets in UK & Europe
Individuals, Companies, SPVs
No credit & adverse credit considered
|Exit strategy||Sale or refinance|
We offer fast, innovative, flexible property auction bridging finance to businesses and individuals throughout the UK. Our loans, which are secured on property or land, enable clients to quickly raise funds to acquire property.
Property auctions and the financial markets move quickly, and opportunities come and go in the blink of eye, making it difficult for businesses, investors, landlords and home buyers to acquire their next property or expand their portfolio.
This is compounded by the added complexities of buying a property at auction, wherein buyers are required to complete the purchase of properties won within 28 days. Buying a property at auction has many advantages though, most properties sold in this way are offered at below market rate prices enabling buyers to achieve great investment opportunities.
When it comes to financing properties bought at auction, the best way to secure funds is by using auction bridging loans.
Looking for UK auction finance? We can help.
To get expert assistance today for your bridging loan arrange a call.
To find out the exact costs of auction finance click here - it takes just a minute!
Can you get a mortgage on an auction property?
Although it is possible to get a mortgage on an auction property, it may be trickier than a conventional mortgage. Several criteria will need to be met before a mortgage can be granted to you. You can find out about the determining criteria by your mortgage provider and the auction house.
It's important to remember that not every property is eligible for mortgage finance, so it's always best to cross-reference the details from the seller with that or the mortgage company.
If you can take out a mortgage on an auction property, a bridging loan may help give you the immediate funds to purchase the property while waiting for the mortgage company to set up your long term finance.
Is Auction Finance a bridging loan?
Yes, Auction Property Finance is a type of bridging finance. For the inexperienced, bridging finance otherwise known as bridging loans are a short-term finance solution that literally bridges the gap between the time of initial purchase to the time when you refinance with a traditional longer term solution such as a mortgage.
For example, you may buy a property with a short lease at auction using a bridging loan, then negotiate and extend its lease, now you're able to obtain a traditional mortgage from a high street lender and repay your original bridging loan, achieving your exit.
Key benefits of using bridging loans for auction properties
In comparison with other types of finance, auction bridging loans have many benefits. There are many reasons that a borrower may choose a bridging loan over a more traditional form of financing.
Property Auction Finance Is Fast To Arrange
Traditional loans such as business loans, commercial and residential mortgages, often take weeks or even months to arrange. Auction finance can be arranged and wired to a bank account in as little as 72 hours, and often an agreement-in-principle happens within 24 hours.
Although these loans typically have higher interest rates than other forms of lending because the repayment terms are so short (usually around 3-24 months), they often work out to be the most cost-effective form of borrowing.
Property Auction Finance Is Flexible
Auction finance loans have more flexible lending criteria than other types of funding, meaning that they can be approved and transferred to the borrower within a very short space of time.
Where traditional loan application processes are concerned with borrowers credit histories, income and loan affordability, auction finance lenders are more interested in the value of the property you are purchasing and seeing you have a solid exit strategy (how you plan to repay the loan). This offers buyers more opportunity to create their own favourable conditions for borrowing.
They can also be secured on all types of properties - including those that other lenders will not offer lines of credit on.
How bridging loans help you buy your next auction property
An auction bridging loan is frequently used to buy property at auction specifically because they can be set up so quickly (usually within 3 -14 days) and are available for sums that range from as low as £26k up to £25m or more.
When buying property at auction, 10% of the total property price is required as a deposit on the day of the auction, as soon as the buyer places their winning bid. The buyer then has 28 days to complete the purchase, or they risk losing both the property and their deposit.
Traditional mortgages tend to take substantially longer to arrange than property auction finance, meaning that they are often unsuitable for this type of purchase. Auction finance, which is essentially a type of bridging loan, is therefore usually used to literally ‘bridge the gap’ between when the purchase funds are needed and the time it takes to arrange a long-term mortgage.
Once this mortgage is arranged, the buyer can use this funding to pay back the auction bridging loan.
What's better - an auction finance lender or broker?
You basically have two alternatives when it comes to sourcing and securing auction finance in the UK. Either you go to a bridging finance broker or you go to a bridging finance lender. Both have merits.
A broker is likely to be able to package up your unique circumstances and requirements into a more palatable deal for a lender. A bridging loan broker will also likely know several competitive lenders who would like the deal they have so are able to negotiate a better rate on the the clients behalf. Whilst brokers fees increase the cost to the borrower, they can pay for themselves through the fact an auction finance broker can source the borrower a better deal for their loan.
Additionally, auction finance brokers tend to know more lenders then those well-known names, for example some brokers have access to private investors and family offices who also like to lend to those who specifically buy property at auction.
Going direct to a lender will likely mean you avoid paying the broker fees, however you may also be limited to fewer lenders and therefore end up paying a higher auction finance interest rate.
How do I apply for auction finance a.k.a auction bridging loans?
If you're ready to get a no obligation quote for auction finance, we're ready to help. We're an auction finance specialist broker and can offer you experienced based insights, helpful information and explain the whole process to you so you can make an informed decision.
Arrange a call with one of our experts - we're ready to help.
What property types can Auction Finance be used for?
Auction finance can be used for any type of property or land your lender is comfortable to lend against. From our experience, residential and commercial property make up a significant portion of all auction finance requests, however, not all. Whilst lenders prefer to focus on the high returns residential developments or mixed use developments create as they're less risky, more lenders are venturing further from their comfort zones in order to support the current opportunities developers are facing.
These development opportunities could be:
- residential property
- commercial property
- mixed-use property
- light industrial property
- heavy industrial property
- land - with or without planning such as:
- agricultural land
- demolition sites
- derelict spaces or scrubland
- brownfield land
- gardens and green sites
- car parks
Research properties and auctioneers in the area you want to buy
Do your research of auctioneers located in the close proximity to the area you intend to buy your property in. Local auctioneers should better know the local markets and care for their reputation in that area. For sourcing commercial property opportunities you might want to try reading industry property journals such as Estates Gazette which publishes regular surveys of different areas and industry sectors, or contact local businesses and organisations, such as Chambers of Commerce or Business Link to ask advice on where to buy.
When you've narrowed your selection down next make sure any auction houses you're considering are legitimate businesses. A quick check on companies house should suffice.
Check their track record for selling properties at auction by searching the internet, Google reviews are a good starting place, or Googling the auctioneer's name + "Bad Reviews" should return reviews from anyone who has previously had an issue with them. If there are no reviews then that might be a red flag as its unusual a large company has zero reviews. If at all possible its also worthwhile speaking to other people who have bought from them before, and an easy way to do this is by contacting a couple of local estate agents to get their view or again search the internet for the auctioneer's name + "forum".
Arrange viewings and ask questions
Once you've identified one or more properties that interest you its important that you physically view them. Sounds obvious but we often hear of people getting swept up at auction, often due to them not being able to secure the property they originally went to auction for and bidding on another property simply so they didn't 'miss out'.
If you get the urge to randomly bid then that should be a red flag, remember that few serious investors risk hundreds or thousands of pounds on a nothing more than a whim. If you don't have any construction or trade experience, aim to take someone who does with you.
If you'd like to view a comprehensive property checklist that lenders consider before lending against a property you can find one here. If a lender judges a property's suitability from this list then perhaps its worthwhile you considering the same list before seeking auction finance?
Aside from the condition the property visiting a property allows you to get a wider perspective of the neighbourhood and its general location to amenities and potential issues. Here's a list of questions to ask yourself:
Is the property sited near or next to:
- a major trunk road, dual carriage way or motorway
- rivers, flood plains, water courses etc.
- an existing or historical mining area
- landfill or recycling centres
- sewage treatment centres
- railway lines
- large overhead electrical suspension, tension or transmission towers (commonly, but incorrectly, referred to as Pylons)
- large capacity stadium
- university, college campus or large school
Is the purpose for which the Property is used in keeping with other property in the area?
So, for example, is the street mainly commercial but the property you wish to buy is residential then that may harm the property's rentability or saleability if you default on your loan and the lender repossess it. When you start thinking like a lender it can help you spot potential pitfalls, which in the long run will cost you money.
Have you received a copy of the legal pack?
Don't assume there aren't any covenants on the property you're intending to bid on at auction.
Its not uncommon that a residential property with a large plot comes with a not so well documented covenant restricting future development of the property and / or adjacent land.
When in doubt, consider asking a solicitor to review the legal pack that comes with every property, and do so before the day of auction. Auctioneers are likely to have a limited version of 'property particulars' for the properties being sold at auction, remember those packs are generally collated by the sellers and its your responsibility to ensure you know what you're buying.
You need to make your decisions fast
If you've identified your opportunity, completed your research and are ready to commit to a property then be prepared to move fast. There's usually only a month between property particulars being published to the day of the auction, so you need to have your game plan ready before that auction day arrives.
Ask to be kept informed
Changes to the lots for sale and indeed the sale particulars change, when this happens its known as an Addendum. Its a good idea to keep abreast of these changes so you're not caught off-guard on auction day. To do so simply speak with your auctioneer and ask to be kept up-to-date on a particular lot and to be sent its latest auction sales particulars.
Know your budget and stick to it
Your auction finance is likely to be a finite sum of money, and that'll be for the purchase of your property at auction and any works.
If you're also factoring in works to the property such as light refurbishment or heavy development then you need to stay on top of your finances. With "two in 5 renovators overshooting their budget by an average of 20% – Hiscox", and with the average cost of materials for repair and maintenance work rising at 25.5% for the year to September 2021, its easy to see how costs can spiral.
So plan a contingency on your works and avoid eating into it to simply increase your purchase price.
Never sign anything until you've read it
Auction house's T&C's are there to protect the auction house - not you. By signing their terms of sale you are agreeing to abide by them. Never sign your name to anything without reading and understanding the agreement you are entering in to. If you read it and are still unsure of any points always seek legal advice.
Arrange your property auction finance early
With over 120 main stream lenders, and another 180 bridging loan companies in the UK, you'd think that finding a lender for auction finance shouldn't be difficult? Its not always the case - so give yourself time and line up your auction finance loans in advance. Lending decisions for auction property purchases are dependent on several factors, but mainly its whether or not you can be entrusted with the funds and whether your exit is viable.
Experienced versus inexperienced
If you're experienced in property development and have used auction finance before then this is likely to count in your favour, as would having a proven track record of making profit via auction property purchases. Additionally offering up additional security such as one or more properties will help reduce the risk to the lender and potentially bring you more favourable auction finance rates which equates to a lower gross loan.
The main stay of auction property lots are cheap for a reason, for example it could be due to the lease is too short for mainstream lenders, or that there's structural issues or heavy refurbishment required before the property can be let or sold. In these circumstances, and many more, an auction bridging loan is your most likely route of property auction finance as traditional lenders tend not to lend in scenarios where there is more perceived risk.