When buying a property at auction in the UK, quick access to funds is crucial. A auction bridging loan is a short-term loan designed to help buyers secure a property swiftly. Here’s what you need to know about this type of financing, especially if you’re considering purchasing a residential or buy-to-let property.
Understanding Auction Finance Requirements
Auction bridging finance is a temporary loan that covers the gap between purchasing a property and securing a long-term mortgage or selling the property. It’s particularly useful in auction scenarios, where buyers must complete the purchase within a tight timeframe, usually 28 days after the auction ends.
Key Features:
- Quick Approval – Lenders understand the urgency and can approve funds within days.
- Short Term – Typically lasts between 1 and 12 months.
- Flexible Terms – Can be tailored to fit your specific needs.
What is the process of buying a property at auction?
- Preparation: Before the auction, get a Decision in Principle (DIP) from a bridging finance lender. This shows you can access funds quickly if you win the bid.
- Auction Day: If your bid is successful, you pay a 10% deposit immediately and sign a contract committing to complete the purchase within 28 days.
- Completion: The remaining balance must be paid within 28 days, which is where auction bridging finance comes into play.
Consequences of Missing the Deadline
- Loss of Deposit – You’ll forfeit the 10% deposit.
- Legal Action – The seller can take legal action against you for breach of contract.
- Damaged Reputation – This can impact your future dealings at auctions.
Current Rules and Regulations
- Mortgage Rules – Ensure you understand the mortgage rules for residential and buy-to-let properties, as they differ in terms of requirements and tax implications.
- Auction Conditions – Each auction house has specific conditions of sale, so review them carefully to avoid surprises.
- Valuation and Survey – Conduct a valuation and survey before the auction to assess the property’s condition and value.
Why Use Auction Bridging Finance?
- Speed – Traditional mortgages take weeks or months to process. Bridging loans can be arranged in days.
- Flexibility – They offer a flexible repayment structure, aligning with your plans to refinance or sell the property.
- Accessibility – Available to individuals with various financial backgrounds, including those with less-than-perfect credit scores.
Next Steps:
Auction bridging finance is a vital tool for UK residents looking to buy residential or buy-to-let properties at auction. It ensures you have the necessary funds to complete the purchase quickly and avoid the serious consequences of missing the payment deadline.
Speak to our auction finance broker team to discuss what is possible.