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Auction Finance | Finance Auction Purchases

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What is auction finance?

Auction finance is a type of bridging loan. Bridging loans are used to purchase properties at auction as they can comfortably be processed in the 28-day completion timescale.

Read more on auction finance below, check out our guide section or auction finance calculator.

What are the advantages of auction finance?

The advantages of auction finance are:

  • It allows you to complete auction purchases within the 28 day completion deadline.
  • Auction finance is flexible and can be offered against properties in poor condition.
  • There are often no monthly payments to make as the interest is added to the loan.
  • They facilitate profit from property investment.

What are the disadvantages of auction finance?

The disadvantages of auction finance are:

  • The interest rates on auction finance are higher than similar products, such as buy to let mortgages and commercial mortgages.
  • Some auction finance lenders charge high penalties if you fail to repay the loan on time.

How much can I borrow?

Auction finance can be arranged from £25,000 with no maximum loan size.

We’re able to fund residential property up to 85% LTV (loan to value), or up to 100% with additional security.

How long can I borrow the money for?

Borrowers can take out auction finance for terms between 1-24 months for unregulated loans. For regulated applications, your maximum term will be restricted to 12 months.

Key product features

Key features

Max LTV Up to 85%
Interest rate From 0.39% per month
Charge types1st charge only
Term1-36 months (maximum 12 months for regulated loans)
Interest typeAdded to the loan, deducted or serviced
Completion timescale5 days – 3 weeks

Criteria

  • Residential, commercial property or land acceptable
  • Available to individuals, partnerships, LLPs, Ltd companies, offshore companies, foreign nationals and pension funds
  • Minimum applicant age 18 years – no maximum age
  • Available in England, Scotland, Wales and Northern Ireland
  • Adverse credit accepted (on a case by case basis)

What auction finance rates will I pay?

Auction finance rates start at 0.39% per month for residential property. Most loans are offered at rates between 0.45-0.65% per month.

The lowest rates are usually reserved for lower LTV applications, with loans at 50% or below securing the best terms. This is because lenders price their applications to risk, and greater equity in the property reduces the risk of financial loss to the lender.

What are the set-up costs?

The set-up costs of auction finance are:

Lender arrangement fee – This fee is charged by the lender and is usually 1-2% of the loan amount. It is paid on completion and can usually be added to the loan.

Lender exit fee – Although it is becoming less common, some lenders charge an exit fee when the loan is repaid. Where charged, this would usually be 1 month’s interest.

Broker fees – Although we don’t charge a fee for arranging a bridging loan, many brokers do. This fee is usually between £500 and 1.5% of the loan amount.

Valuation fee – In some cases, a physical inspection of the property by a chartered surveyor is needed. In many cases, we can avoid this by undertaking an electronic valuation, which can save you money.

Legal fee – This fee is paid to the solicitors for completing the legal work. Usually, both your own and the lenders legal fees must be met by the borrower.

How can I find out how much I’d pay for auction finance based on my circumstances?

We can provide written terms to you within 2 hours. If your application is urgent, we can usually issue terms within 30 minutes. We pride ourselves on working together with our clients, so if your need is time sensitive, just let us know.

What information is needed to make an auction finance application?

In order to make an application, you will usually need to provide the following information:

  • Details of the property to be purchased
  • A copy of the auction sales particulars
  • Details of your exit strategy
  • Your own personal details

How quickly can auction finance be arranged?

Auction finance applications can usually be completed in 7-14 days. To save time on your application, some lenders will use a desktop valuation and search indemnity insurance to reduce the time taken to complete the process. These tools can save a lot of time and ensure that you complete your purchase well before your deadline. Where legal work and valuations are already complete, for instance, where a lender has withdrawn their offer late in the day, it is possible to complete on the same day that you apply.

Who are the best auction finance lenders?

The best auction finance lenders include United Trust Bank, Aspen Bridging and Together Money. That said, the best lender for your circumstances will vary depending on your situation and the property being purchased. When searching for the most suitable option, the best approach is to ask others with personal experience of financing auction purchases, or by using an auction finance broker.

Brokers can make the process of arranging auction finance far simpler, which is often vital given the tight deadlines that applicants must work to.

Auction finance FAQs

Why use an auction finance broker?

A good auction finance broker can save you money and reduce the risk of problems with your application.

Although this type of finance can complete quickly, that’s not to say that this will always happen. The process is not as straightforward as people often think and the key to making sure there are no delays comes down to solving problems quickly as they arise.

You will always get questions from the lender and experience is crucial in managing the process.

What properties can auction finance be secured against?

Auction finance can be offered against almost any security, including the following:

  • Residential property
  • Retail units
  • Property in a poor state of repair
  • HMOs
  • Semi-commercial property
  • Land with planning
  • Land without planning
  • Farms
  • Leisure complexes
  • Hotels
  • Guest houses
  • Pubs
  • Care homes
  • Shops
  • Offices

Can first time buyers get auction finance?

Yes, a first-time buyer can get auction finance. That said, buying a property at auction can be risky and as such, it’s important that you take all possible steps to keep risk to a minimum. This can be done by ensuring that your application is pre-approved before the auction to reduce the likelihood of being unable to complete the purchase.

Can development plots be funded using auction finance?

Yes, we can fund the acquisition and development with auction finance. We can fund land up to 65% LTV and can usually achieve rates from 0.95% per month for smaller plots.

For larger plots with planning, where works commence immediately, we can offer full development finance at low rates.

Why do auction purchases require specialist finance?

When buying a property at auction, certain rules must be followed.

Firstly, the winning bidder must pay 10% of the purchase price on the day of the auction. You must then complete within 28 days (for residential properties, commercial and land may have slightly longer deadlines to allow for more complex processing).

Should you fail to come up with the money at the end of the 28 days, you stand to lose your deposit and the right to buy the property. Traditional mortgages can take time to complete, especially for unusual or commercial security. As a result of this, they leave you at risk of losing your deposit and costs.