Auction Property Finance
Auction finance is a type of bridging finance. When the hammer falls at the auction, you have effectively exchanged contracts, with completion following between 10 and 20 working days thereafter.
This is not enough time for most mainstream lenders to arrange completion funds – so unless you are a cash buyer a specialised Auction Bridging Loan will usually be required. A properly advised client will have done their due diligence on the property before the auction (See the Attwells auction page here) and will know any issues that may be affecting the property . You should also obtain an Agreement in Principle from the lender prior to the auction so that you know how much the lender is willing to lend you as if you overstretch and cannot obtain funding, you may lose the 10% deposit you will be required to pay on exchange of contracts.
What is a Bridging Loan?
Bridging Loans are Short Term Finance that are usually arranged within a short time-frame. Bridging finance is useful to gain capital quickly and typically is an interim solution until a lower-interest, more long term solution can be found. As the name suggests, they exist to “bridge” a gap.
Bridging finance is always used to raise finance quickly, and often in one of the following scenarios:
- Property Refurbs
- To complete a development
- To purchase property that is unsuitable for lending from a mainstream lender
- To bridge a finance gap between the acquisition of one property and the sale of another, etc.
- Since it is for a specific short-term purpose, interest rates can be higher than traditional term loans.
A bridging lender will also normally require a clear exit strategy, to ensure that the bridging loan and any interest costs will be fully repaid.
If you are a buyer or seller and want expert advice at auction call Attwells Auction Team for a quotation on either 0207 722 9898 or 01473 229200 or email us at email@example.com.