Auction property finance
What is auction finance and how does it work?
If you are an investor wanting to take advantage of the benefits associated with purchasing a property at auction, you can often face barriers when it comes to raising funds including lengthy application processes and reduced lending options from high street lenders.
This has caused auction buyers to rethink financial agreements and to seek alternative methods of funding with loans offering a quick solution to the funding gap.
In effect, property auction finance is simply another definition for short-term or bridging finance but instead it is used to purchase properties at auction. Where properties are sold on a tight schedule auction finance can be arranged quickly, ensuring that it fits neatly into the fast purchasing process.
Whilst this type of short-term finance has its benefits, there are other considerations to take into account before proceeding:
- Short-term bridging finance is more expensive than mainstream mortgage products
- Administration and legal fees tend to be higher for these types of arrangements
- You need to ensure you have a backup plan should your repayment strategy fail
Whilst we would recommend that you arrange your finance before you bid, this is not a necessity. However, you will still be required to pay 10% of the final selling price on the day and the remaining 90% within 28 days.
Generally, lenders will base how much you can borrow on the purchase price/guide price and typically lend up to about 70%. However, you should be aware that properties rarely sell at auction price and you may end up paying more and so need to ensure you can fund a higher amount if required.
Making it easier to prepare for your property auction
At Key Solutions we will work closely with you to ensure you go to the auction fully prepared so you can bid with confidence assured that you have the finances in place to complete the transaction with minimum fuss.
Whether a seasoned purchaser at auction of if you are considering your first purchase, get in touch with our friendly team of specialist advisers and let them help you understand the process. Give us a call on 0800 138 5856 or fill out a contact form and one of the team will call you back within 24 hours.
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