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When buying a property at an auction, you will typically need auction finance, which is a type of short-term loan that is used to finance the purchase of a property at auction. In the United Kingdom, auction finance is typically used by property investors and developers who are looking to buy a property at auction but do not have the funds available to pay for the property upfront. Auction finance loans are usually secured against the property being purchased, and they typically have higher interest rates than traditional mortgages due to the short-term nature of the loan.
Auction finance loans are typically used to fund the purchase of a property at auction, as well as any fees or taxes associated with the sale. They can also be used to cover the costs of any necessary renovations or repairs that need to be made to the property before it can be sold. Auction finance loans are typically available from specialist lenders, and they are usually offered on a case-by-case basis depending on the borrower’s financial situation and the specific details of the property being purchased.
Buying a property at an Auction
If you are interested in buying a property at an auction in the United Kingdom, there are a few things you should consider before you bid:
Research the property: It’s important to do your due diligence before bidding on a property at auction. You should research the property’s location, condition, and any potential issues that may affect its value. You should also research the surrounding area to get a sense of what similar properties are selling for.
Determine your budget: You should have a clear budget in mind before you start bidding at an auction. It’s easy to get caught up in the excitement of the auction and overbid, so it’s important to set a firm budget and stick to it.
Get financing: If you don’t have the cash on hand to pay for the property outright, you will need to secure financing before the auction. You may be able to get a traditional mortgage, or you may need to consider other options such as a bridging loan or auction finance.
Attend the auction: It’s a good idea to attend the auction in person if possible, as this will give you a chance to see the property and get a sense of the competition. If you can’t attend in person, you can usually bid remotely by phone or online.
Be prepared to act quickly: Once the auction starts, you will need to be ready to bid quickly. It’s a good idea to have your financing in place and your budget set before the auction starts so that you can act quickly when the property you are interested in comes up for sale.
Understand the terms of the sale: Make sure you understand the terms of the sale before you bid. This includes any fees or taxes that you will be responsible for paying, as well as any conditions that may be attached to the sale.
As a specialist Auction finance broker, we can provide:
- Access to low rates
- Day one decision in principle
- Loans from £50,000 with no maximum
- Up to 75% LTV (up to 100% with additional security, i.e. another property)
- Up to 85% for refurbishment buy to let/investment only projects
- No early repayment charges
- Panel of lenders
- Lenders that accept low EPC ratings
How does auction finance work in the UK?
Auction finance is a type of short-term financing that is used to purchase property at auction. It is typically used by property investors and developers who are looking to buy a property, renovate it, and then sell it for a profit.
In the UK, auction finance is typically provided by specialist lenders who have experience in the property market. These lenders will provide the funds needed to purchase the property at auction, and the borrower will then have a set period of time, usually around 6-12 months, to complete any renovations and sell the property.
The lender will usually charge a higher interest rate on the loan to compensate for the added risk of lending on a property that has not yet been renovated. The borrower will also be required to put down a deposit, which is typically around 25% of the purchase price of the property.
If the borrower is able to sell the property for a profit within the agreed upon time period, they can use the proceeds to pay back the loan and keep the remainder for themselves. If the borrower is unable to sell the property, they may be required to repay the loan in full, including any accrued interest.
What information is needed to make an auction finance application?
To apply for auction finance, you will typically need to provide the following information:
Personal identification: This may include a copy of your driver’s license or passport, as well as proof of address, such as a utility bill or bank statement.
Financial information: You will need to provide details about your income, assets, and liabilities. This may include information about your employment, any outstanding debts, and any other financial commitments.
Property information: You will need to provide details about the property you are interested in purchasing at auction, including the location, size, and condition of the property.
Renovation plan: If you are planning to renovate the property, you will need to provide a detailed plan outlining the work that needs to be done and the materials that will be used. You should also include an estimate of the cost of the renovations and a timeline for completion.
Business plan: If you are a property developer or investor, you will need to provide a business plan that outlines your experience in the industry, your strategy for buying and selling properties, and your financial projections.
It’s important to note that every lender has their own specific requirements, and you may be asked to provide additional information or documentation as part of the application process.
What kind of properties can auction finance be used to purchase?
Auction finance can be used to purchase a wide range of properties, including residential properties (such as houses, flats, and apartments), commercial properties (such as offices, shops, and warehouses), and land.
The type of property that can be purchased with auction finance will depend on the lender’s specific guidelines and the borrower’s own experience and expertise. For example, some lenders may only provide auction finance for properties that are in good condition and do not require extensive renovations, while others may be willing to lend on properties that need more work.
It’s important to note that the property being purchased with auction finance must be a sound investment, with the potential to be sold for a profit after any necessary renovations have been completed. Borrowers should carefully assess the potential return on investment and the risks involved before applying for auction finance.
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Is auction finance quick to arrange?
Auction finance can be a quick and convenient way to access the funds needed to purchase a property at auction, but it is not always an instant process.
The speed at which auction finance can be arranged will depend on a number of factors, including the lender’s underwriting process, the complexity of the loan, and the borrower’s financial situation.
In general, it is a good idea to start the process of applying for auction finance well in advance of the auction date. This will give you enough time to gather the necessary documentation and go through the application process with the lender.
It’s also a good idea to have a backup plan in place in case you are unable to secure auction finance in time for the auction. This might involve having access to other sources of funds, such as a line of credit or a personal loan, or having a co-borrower who is willing to help with the purchase.
What are the alternatives to auction finance?
There are a number of alternative financing options that can be used to purchase a property at auction. Some common alternatives to auction finance include:
Cash: If you have the cash available, you can use it to purchase the property outright. This can be a good option if you don’t want to take on any additional debt or if you are concerned about the property being repossessed if you are unable to repay a loan.
Mortgages: If you have a good credit score and a stable income, you may be able to secure a traditional mortgage to purchase the property. This will typically involve putting down a deposit and making regular payments over a set period of time.
Personal loans: If you don’t have the cash or a good credit score, you may be able to use a personal loan to finance the purchase. Personal loans can be used for a variety of purposes, including home renovations and the purchase of personal property.
Private funding: You may be able to find a private investor who is willing to provide the funds needed to purchase the property. This can be a good option if you are unable to secure financing from traditional sources, but you will typically need to pay a higher interest rate and may be required to give up a share of the profits.
It’s important to carefully consider the pros and cons of each financing option before deciding which one is right for you. You should also be prepared to provide detailed financial information and a solid business plan to any potential lenders or investors.
What are the benefits of buying a house at auction?
There are several benefits to buying a house at auction:
Speed: Auctions can be a fast way to buy a property. Once the gavel falls, the property is yours and the sale is legally binding. This can be particularly useful if you are in a rush to move or if you are competing with other buyers for the same property.
Potential to get a good deal: Properties sold at auction are often priced below market value, as they may have been repossessed by the lender or be in need of significant repairs. This can provide an opportunity to get a good deal on a property that might otherwise be out of your price range.
Transparency: Auctions are a transparent process, with all potential buyers bidding in public. This can help to level the playing field and ensure that the property is sold to the highest bidder.
Flexibility: Auctions offer a variety of payment options, including cash, mortgages, and auction finance. This can make it easier to find a financing option that works for you.
It’s important to note that buying a house at auction also carries some risks. You will need to pay a deposit at the time of the auction, and you will be required to pay the balance within a set period of time, usually 28 days. If you are unable to pay the balance, you may lose your deposit and the property. You should also be prepared to pay any outstanding debts or legal fees associated with the property. It’s a good idea to do your due diligence and research the property thoroughly before bidding to ensure that you are making a sound investment.
Can I get auction finance as a first time buyers?
Yes, it is possible for first-time buyers to get auction finance. Auction finance is a type of short-term loan that is specifically designed to help buyers purchase a property at auction. There are a number of lenders who offer this type of finance, and the terms and conditions will vary from one lender to another. In order to qualify for auction finance, you will generally need to meet certain eligibility requirements, such as having a good credit score and being able to demonstrate that you have the financial capacity to repay the loan. If you are a first-time buyer and are interested in using auction finance to purchase a property, it is a good idea to research the different lenders and their terms and conditions, and to consult with a financial advisor or mortgage broker to determine the best option for your specific circumstances.
Can I purchase a development plot with auction finance?
It is possible to use auction finance to purchase a development plot, but it may be more difficult to obtain this type of financing for this type of property. Auction finance is typically used to purchase properties that are considered “standard,” such as residential houses or commercial buildings. Development plots can be more difficult to finance because they do not have any existing structures and may not have all necessary approvals in place, which can make them more risky for lenders.
If you are interested in using auction finance to purchase a development plot, you may need to demonstrate that you have a solid plan in place for the development of the property and that you have the necessary experience and resources to carry out the project. You may also need to provide additional collateral or security to secure the loan. It is a good idea to do your research and shop around to find a lender who is willing to work with you and who offers terms that are favorable for your specific situation. You may also want to consider working with a mortgage broker or financial advisor who can help you navigate the process and find the best financing options available.
Can I get 100% auction finance?
It is generally not possible to get 100% auction finance, as most lenders will require you to have some form of deposit or equity in the property. A deposit is a sum of money that you pay upfront when you purchase a property, and it is typically a percentage of the purchase price. The deposit helps to reduce the lender’s risk by reducing the loan to value.
In some cases, you may be able to get a loan for a higher percentage of the purchase price, but you will typically need to provide additional security. This could include things like a second mortgage on another property, a letter of credit, or a personal guarantee. It is a good idea to carefully review the terms and conditions of any loan that you are considering and to consult with a financial advisor or mortgage broker to determine the best option for your specific circumstances.
How much deposit will I need when buying a house at an auction?
In the UK, the amount of the deposit that you will need to provide when purchasing a house at an auction will depend on a number of factors, including the terms of the auction, the lender’s requirements, and your personal financial situation. In general, you can expect to pay a deposit of at least 15% of the purchase price when you buy a property at auction. This means that if you are bidding on a property that has a purchase price of £200,000, you will need to have a deposit of at least £30,000 available.
The deposit is typically due within a short period of time after the auction, often within 24 to 48 hours. It is important to have the deposit available when you bid on a property, as failure to provide the deposit in a timely manner could result in the loss of your bid and the property. If you are using auction finance to purchase the property, the deposit may be included as part of the loan.
However, you will still need to have sufficient funds available to cover any additional costs that may be required, such as any completion costs, fees and other expenses. It is a good idea to carefully review the terms of the auction and to consult with a financial advisor or mortgage broker to determine the amount of the deposit that you will need and to ensure that you have the necessary funds available.
Rates from
Auction finance rates
from-
Up to 85% Loan to value for the refurbishments
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Up to 100% of refurbishment costs
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Lenders that work on the guaranteed value after works are completed
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Light, Medium and Heavy Refurbishment projects (from internal works to conversions and extensions)
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Staged releases
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Buy to rent projects
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Change of use - if changing the purpose of a building
Example fee’s
Speak to our specialist brokers about your situation by using the live chat option or calling 0800 316 2224.
| Borrow £100,000 and you would approximately pay back | |||
|---|---|---|---|
|
Interest Rate |
Interest 0.4% |
Interest 0.6% |
Interest 0.8% |
|
6 months |
£104,795 |
£106,054
|
£107,325
|
|
9 months |
£106,058
|
£107,974
|
£109,922
|
|
12 months |
£107,336
|
£109,930
|
£112,581
|
| Borrow £250,000 and you would approximately pay back | |||
|---|---|---|---|
|
Interest Rate |
Interest 0.4% |
Interest 0.6% |
Interest 0.8% |
|
6 months |
£258,431
|
£261,536
|
£264,671 |
|
9 months |
£261,545
|
£266,272
|
£271,074
|
|
12 months |
£264,696
|
£271,093
|
£277,632 |
