Property Deals Secured with Auction Finance
First-time buyers, investors, and developers are increasingly interested in UK property auctions. The auction market is a great place to find competitively priced properties, repossessed homes, and unique opportunities.
It is difficult to meet tight deadlines at auctions. In most cases, buyers must pay a deposit immediately and pay the remainder within 28 days. Mortgages that fit this timeframe are rare, leaving many buyers at risk. The perfect solution to this problem is auction finance, also known as auction bridging loans.
In most auction purchases, buyers are expected to pay a deposit immediately, normally 10% of the purchase price, and then complete the remaining balance within 14-28 days. This makes speed absolutely essential when choosing the right finance option.
What is auction finance?
A short-term bridging loan is designed to help buyers close auction purchases quickly. Auction finance can be arranged within days, unlike mortgages, which can take weeks. Due to its speed, it is ideal for meeting deadlines for auction completions.
A typical auction loan lasts for 6-12 months, including time for refinancing or reselling.
Loans typically range from £26,000 up to £5 million, depending on the property and borrower profile.
Interest rates are usually charged monthly and may start from around 0.85% above the Bank of England base rate, depending on the lender, risk profile, and loan-to-value.
Auction finance is usually secured as a first charge against the property, although second charge options may be available in certain circumstances.
Both regulated and unregulated bridging loans are available, depending on whether the property will be owner-occupied.
Interest can be structured as rolled up (added to the loan and repaid at the end) or serviced monthly, depending on the borrower’s preference and lender terms.
How Auction Finance Works
Fast and simple, the process is as follows:
1Pre-Approval
Some buyers apply for pre-approval before auctions to find out their maximum budget.
In many cases, lenders can provide a decision in principle (DIP) the same day as receiving an enquiry, subject to initial checks.
2Bidding with Confidence
By pre-approval, you can bid at auction with confidence.
It is strongly recommended to have a solicitor review the auction legal pack before bidding, as auction purchases become legally binding once the hammer falls.
3Quick Completion
Following a successful bid, lenders complete their checks and release funds.
They may also arrange a valuation if required, and in many cases funds can be released within 7-10 days where legal support and paperwork are in place.
4Exit Strategy
The short-term loan is repaid by refinancing or selling the home.
Refinancing may be through a buy-to-let mortgage, commercial mortgage, or residential mortgage, depending on the property and the borrower’s plans.
Depending on the lender and product selected, early repayment may incur an exit fee, although some products offer no-exit-fee options.
Key Benefits of Auction Finance
1. Speed
Quickly approve and release funds within strict auction deadlines.
2. Flexibility
Suitable for residential, commercial, or non-mortgageable properties.
3. Confidence
A pre-approval allows for confident bidding.
4. Short-Term Solution
Ideal for home renovations, refinancing, or selling.
5. Access to Unique Opportunities
Auction finance connects auction properties to mortgage-ready properties.
6. Wider Property Access
Suitable for residential, commercial, semi-commercial, land, and other unique or non-standard properties that may not qualify for a traditional mortgage.
Who Can Use Auction Finance?
- Property Investors: Buying properties quickly to grow portfolios.
- Developers: Purchase or renovate land quickly.
- Landlords: Creating a competitive rental portfolio.
- First-Time Buyers: Buying through auctions at a lower price.
- Applicants with Complex Circumstances: Some lenders may also consider borrowers with complex income structures or adverse credit histories, subject to assessment.
Auction Finance: Things to Consider
- Costs and Fees: Fees for litigation, valuation, and arrangement.
- Exit Strategy: Refinance, sell, or find other financing options.
- Due Diligence: A property at auction is sold "as is," which means you should inspect and research it before bidding on it.
- Loan-to-Value (LTV): LTV for auction financing is typically 70-75%.
Costs and Fees: In addition to arrangement fees, borrowers should also consider valuation fees, legal costs, and potential exit fees depending on the product selected.
Exit Strategy: A clear and realistic repayment plan is essential before completing, whether that means refinancing, selling, or moving onto another finance product.
Due Diligence: Because auction properties are sold “as is”, it is important to review the legal pack with a solicitor and inspect the property before bidding wherever possible.
Loan-to-Value (LTV): Auction finance is typically available up to 70-75% LTV, depending on the lender and property type.
Tapton Capital: Why Choose Us?
As an auction bridging loan specialist, Tapton Capital provides speed, flexibility, and confidence. Services we provide include:
- Fast Approvals: 24-48 hour decisions.
- Flexible Terms: We customize funding for your property.
- Expert Support: Auction and financing assistance.
- Investor-Friendly: Ideal for landlords, developers, and buyers of all levels.
Tapton Capital's finance is ready for when you need it, so you can bid at auctions with complete confidence.
Ready to Secure Your Auction Finance?
Get pre-approved today and bid with confidence at your next property auction.
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Conclusion
Buying property under time pressure requires the use of auction finance, which is more than just a loan. Buying opportunities are secured with speed, flexibility, and reliability. Auction finance partners can benefit investors, developers, and landlords alike.
Whether you are an investor, developer, landlord, or first-time buyer, auction finance can provide the fast and flexible funding needed to secure property opportunities that traditional mortgages may not support within auction timescales.