When buying a property at auction timing is of the essence, and long-term forms of borrowing like mortgages are tough to arrange ahead of tight deadlines.\r\n\r\nThis is where auction financing can help you out, as these short-term loans can be quick to arrange and flexible enough to meet the need of anyone who\u2019s purchasing under the hammer.\r\n\r\nThe following topics are included below\u2026\r\n<ul>\r\n \t<li><a href="#what-is-auction-finance">What is auction finance?<\/a><\/li>\r\n \t<li><a href="#how-auction-loans-work">How does auction finance work?<\/a><\/li>\r\n \t<li><a href="#how-much-deposit-for-auction">How much deposit do I need for an auction loan?<\/a><\/li>\r\n \t<li><a href="#property-type-auction">What types of property can I buy?<\/a><\/li>\r\n \t<li><a href="#auction-finance-broker">What to look for in an auction finance broker<\/a><\/li>\r\n \t<li><a href="#best-rates-for-auction">Getting the best rates<\/a><\/li>\r\n \t<li><a href="#faqs">FAQs<\/a><\/li>\r\n \t<li><a href="#speak-to-auction-expert">Speak to an auction loans expert<\/a><\/li>\r\n<\/ul>\r\nOnce you\u2019ve read through the details below, if you\u2019d like to know more about the process for buying a property using auction finance, give us a call on 0808 189 2301 or make an enquiry and we will arrange for a <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/bridging-finance\/bridging-loan-broker\/">bridging finance broker<\/a> we work with to get in touch.\r\n\r\n[feefo-banner]\r\n<h2 id="what-is-auction-finance">What is auction finance?<\/h2>\r\nAuction finance is simply another term for a <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/bridging-finance\/">bridging loan<\/a>, when this form of borrowing is used to purchase a property at such an event.\u00a0 Property auction bridging loans are offered on a short-term, interest-only basis and can be <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/bridging-finance\/quick-bridging-finance\/">super-fast<\/a> to arrange.\r\n\r\nIt is possible to have a conditional offer on the table within days of the initial <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/bridging-finance\/bridging-loan-application\/">application<\/a>, subject to a valuation being conducted on the property you\u2019re buying.\r\n\r\nProperty auction financing, like any other type of bridging loan, typically comes with a high-interest rate compared to other forms of borrowing, such as mortgages and homeowner loans, but the lending criteria can be more flexible.\r\n<h2 id="how-auction-loans-work">How does auction finance work?<\/h2>\r\nIt is not a requirement to have all your finance sorted and in place before you bid for a property at an auction. In reality, all you need is at least 10% of the final purchase price ready to handover once the hammer falls.\r\n\r\nThat 10% will serve as your deposit and paying it on the day is a requirement as part of the auction bid. The remainder of the full balance will then be due within 28 days, which may not be enough time to arrange a standard mortgage or homeowner loan.\r\n\r\nIf you\u2019re unable to arrange finance in this timescale you could lose your 10% deposit. This is where a bridging loan for auction properties comes into its own, as securing one quickly enough to meet this deadline is realistic, providing you\u2019re eligible.\r\n\r\nMost providers\u2019 lending criteria hinges on the exit strategy, i.e. how you will repay the house auction loan at the end of the term, and this would usually be via the sale of the property or a <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/remortgages\/remortgage-guide\/">remortgage<\/a>.\r\n<h3>Is bidding at auction without loan approval risky?<\/h3>\r\nIt can be, so be sure to seek specialist advice from the experts we work with before doing so, but if you have 10% of the property\u2019s purchase price to put down on the day, 28 days may be enough time to take out a bridging loan to fund the rest of the transaction.\r\n\r\nThe risk is in losing your 10%, so it\u2019s best to get an approval upfront!\r\n<h3>How quickly do property auction loans have to be repaid?<\/h3>\r\nMost bridging loans are offered on a <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/bridging-finance\/bridge-loan-term\/" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">short-term basis<\/a> and must be repaid within 12 months or less. Longer terms are available, as some providers will stretch to 18-24 months, but the lengthiest you\u2019re likely to find is 36 months.\r\n<h3>How is interest calculated on a short term auction loan?<\/h3>\r\nLike with any bridging loan, the lender will charge you interest in one of three ways\u2026\r\n<ul>\r\n \t<li><strong>Monthly:<\/strong>\r\nYou make interest payments each month and the full loan amount is due at the end of the term<\/li>\r\n \t<li><strong>Rolled up:<\/strong>\r\nThe monthly interest charges are tallied up and added to the loan amount at the end of the term. The cumulative total is payable in full at the end<\/li>\r\n \t<li><strong>Retained:<\/strong>\r\nThe lender calculates how much you will owe at the beginning of the term by adding the monthly interest payments to the loan amount.\r\nYou essentially \u2018borrow\u2019 the interest, usually for a set period, and pay everything at the end<\/li>\r\n<\/ul>\r\nIf you\u2019d like to find out more about how auction finance works, get in touch and we can arrange for an expert in this specific area of lending to contact you and discuss further.\r\n<h2 id="how-much-deposit-for-auction">How much deposit do I need for an auction loan?<\/h2>\r\nAuction finance is usually capped to a loan to value (LTV) ratio between 70-75% for the most straightforward cases, which means you\u2019ll need a deposit of at least 30-35% of the property\u2019s value since the interest is also factored in.\r\n\r\nFor higher-risk deals, the LTV can drop to anywhere between 50% and 60%, (what is classed as risky will vary from lender to lender).\r\n\r\nAs a general rule, though, if there is any doubt surrounding your exit strategy paying out, your application may be deemed too risky. This is why having a clear exit strategy from the start is so essential.\r\n\r\nHigher LTV agreements do exist - it\u2019s possible to get <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/bridging-finance\/100-bridging-loans\/" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">up to 100%<\/a>, though this usually means securing the loan against additional properties or assets you already own.\r\n\r\nMost lenders are happy with multiple securities but may expect you to pay valuation fees for each.\r\n<h2 id="property-type-auction">What types of auction property can I buy with auction finance?<\/h2>\r\nWhen using bridge finance to buy at auction, there are few restrictions on the property type you\u2019re able to purchase.\r\n\r\nAuction-goers often use auction loan financing to purchase <a href="#resi">residential<\/a>, <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/">commercial<\/a> and <a href="#mixed-use">mixed-use properties<\/a>, as well as <a href="#unmortgageable">\u2018unmortgageable\u2019 buildings<\/a>.\r\n<h3 id="resi">Residential properties<\/h3>\r\nIt is possible to use a bridging loan on your home to buy an auction property that you\u2019re planning to live in afterwards. For this, you would need to find a <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/bridging-finance\/fca-regulated-bridging-loans\/">regulated bridging provider<\/a>.\r\n\r\nBorrowers occasionally go down this route because obtaining a mortgage for an auction property can take longer than getting a bridging loan. Once you\u2019ve used the loan funds to secure the property, the exit strategy would be a residential remortgage.\r\n\r\nIf you need finance for buying a property at auction, get in touch. The advisors we work with are whole of market and can connect you with the one offering the most favourable rates to somebody in your circumstances.\r\n<h3 id="mixed-use">Commercial\/mixed-use<\/h3>\r\nA number of bridging finance providers are willing to lend to borrowers in the market for commercial property under the hammer. However, there are lenders who place restrictions on certain types of commercial property, such as restaurants and petrol stations, due to the perceived higher risk.\r\n\r\nSome will cap LTV at 50-60% and others won\u2019t lend at all.\r\n\r\nThat said, with whole-of-market access, it shouldn\u2019t be difficult to find a bridging provider who lends for <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/commercial-bridge-mortgages\/" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">commercial properties<\/a>, and if the deal is straightforward, the interest rates and LTV are generally the same as for residential properties (70-75%).\r\n\r\nFor any property with a commercial element, including mixed-use, the lender might ask to see a business plan to assess the viability of the investment.\r\n<h3 id="unmortgageable">Unmortgageable\/uninhabitable properties<\/h3>\r\nSome properties that go under the hammer are fixer-uppers which need serious renovation work. Even with all of the time in the world, some providers wouldn\u2019t be willing to offer you a mortgage on a property they consider uninhabitable, but bridging loans are different.\r\n\r\nIf you can convince the bridging lender that you\u2019re capable of bringing a dilapidated building back into a mortgageable state, they might be willing to provide you with funding for the works. The exit strategy would either be a remortgage on the revamped property or its sale.\r\n\r\nIn order to prove to the lender that you\u2019ll pull off your development plans, it might help if you can evidence past experience in property and convince them that setbacks are unlikely.\r\n\r\nIf you\u2019d like to find out more about the different types of property you can use auction finance for give us a call on 0808 189 2301 or make an enquiry and we will arrange for an expert to get in touch.\r\n<h2 id="auction-finance-broker">What to look for in an auction finance broker<\/h2>\r\nThe first thing to take into account here is whether you need a regulated or unregulated auction finance company.\r\n\r\nIf you need a bridging loan secured on a residential property that you\u2019re planning to eventually live in a regulated bridging lender is what you need.\r\n<h3>Regulated<\/h3>\r\nRegulated bridging loans are regulated by the Financial Conduct Authority (FCA), giving borrowers extra protection against bad advice and mis-selling.\r\n<h3>Unregulated<\/h3>\r\nIf you\u2019re looking for an investment property \/ to secure finance on a property you or your family don\u2019t live in, then an unregulated bridging provider is the way to go.\r\n\r\nUnregulated lenders have the right expertise to deal with investment borrowers and are more flexible, enabling them to offer you a bespoke agreement.\r\n\r\nFor example, if it\u2019s a <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/buy-to-let-mortgages\/" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">buy to let property<\/a> you\u2019re after, an unregulated lender may allow you to borrow based on rental potential, rather than you salary, which may be lower.\r\n\r\nThe advisors we work will have access to every regulated and unregulated auction loan provider in the market, and if you make an enquiry, they will connect you to the provider who is best equipped to offer you a favourable auction financing deal.\r\n<h2 id="best-rates-for-auction">Getting the best interest rates<\/h2>\r\nAll bridging finance applications are assessed on a case-by-case basis but providers usually reserve their most favourable rates for borrowers with the following\u2026\r\n<ul>\r\n \t<li><strong>A strong exit strategy:<\/strong>\r\nThe more likely your exit strategy is to pay out, the more likely you are to be offered an attractive deal. When buying a property at auction, the exit strategy will usually be a remortgage or a sale, so having an offer on the table or an agreement in principle usually helps. If the project involves development work, the lender will be keen for you to evidence that your plans are achievable.<\/li>\r\n \t<li><strong>Clean credit:<\/strong>\r\nAlthough bridging lenders can be flexible, some might not be if you have credit issues which may put your exit strategy in jeopardy. If the exit is a remortgage, some lenders will be cautious of <a href="\/bad-credit-mortgages\/how-to-get-a-mortgage-with-bad-credit\/">adverse credit<\/a> borrowers and underwriters might be concerned about further adverse building up over the term. While credit issues that have no bearing on the exit won\u2019t be an issue for some lenders, a clean file will always go in your favour when it comes to rates.<\/li>\r\n \t<li><strong>Experience in property:<\/strong>\r\nProperty experience isn\u2019t essential to all bridging lenders, but it may help you convince your provider that you\u2019re capable of pulling off your plans. Some lenders may even insist on it if it\u2019s a complex development project.<\/li>\r\n \t<li><strong>A healthy deposit:<\/strong>\r\nAlthough you can get a bridging loan with a deposit of 25% (higher if it\u2019s a risky deal in the lender\u2019s eyes), more favourable rates may kick in if you\u2019re able to put down more - 40% or higher is a good, solid, figure.<\/li>\r\n \t<li><strong>A good security property:<\/strong>\r\nThose seeking short term auction finance for a property purchase are more likely to end up on the best interest rates if they secure the loan against a good, sellable property. The lender will be keen to see that the property will raise the required amount at the end of term, and that there are no factors which might deter potential buyers, such as <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/property-types\/non-standard-construction\/">non-standard construction<\/a> and leaseholds.<\/li>\r\n<\/ul>\r\nIf you\u2019d like to speak with someone about finding the best mortgage rates for the auction finance you require, give us a call on 0808 189 2301 or <a href="https:\/\/enquiries.onlinemortgageadvisor.co.uk\/match-me-with-a-bridging-finance-specialist\/" rel="noreferrer noopener" aria-label=" (opens in a new tab)">get in touch<\/a>. The advisors we work with have access to the whole market and will be able to help you find a deal that best suits your requirements.\r\n<h2 id="faqs">FAQs<\/h2>\r\nHere, you'll find the answers to some of the questions our customers most often ask about auction finance.\r\n<h3>Are there auction finance loans for Limited Company borrowers?<\/h3>\r\nYes, if you\u2019re a Limited Company borrower wanting financing for an auction property, there may be a bridging loan for you. Many auction finance providers cater for Ltd Companies and the interest rates they offer them are usually no different. Ltd Company bridging applications are often treated similarly to <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/buy-to-let-mortgages\/mortgages-for-limited-companies\/" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">Limited Company buy to let<\/a> applications, so the lender may expect a personal guarantee from each of the company directors before releasing the funds.\r\n<h3>Can I use bridging finance to buy at a repossession auction?<\/h3>\r\nAs long as the asset\/property you\u2019re bidding for can provide an exit strategy (or you have another viable exit strategy in place), there\u2019s no reason you can\u2019t use bridge finance to buy a property at a repossession auction. Technically speaking, bridging loans can be used for any legal purpose.\r\n<h3>Can I use a bridge loan to purchase a vehicle at an auto auction?<\/h3>\r\nBroadly speaking, there\u2019s no reason why a bridging loan cannot serve as auto auction financing, as long as you can evidence an exit strategy and convince the lender the deal is worth their while. As previously mentioned, bridge loans can be used for any legal purpose and unregulated lenders have the flexibility to provide them in all kinds of circumstances.\r\n\r\nThe loans we are discussing in this article would need to be secured on a property of course, not the car itself. If you want car finance for an auction purchase this may either be best placed with an unsecured loan, or perhaps an asset finance deal (if the car is valuable). Be sure to speak to an advisor to weigh up all options before pressing ahead.\r\n<h2 id="speak-to-auction-expert">Speak to an auction finance expert<\/h2>\r\nSo, you\u2019ve got your eye on an auction property and have decided you\u2019ll be tabling a bid. It\u2019s time to secure some capital to make sure you can foot the bill when payment is due.\r\n\r\nThe best way to go about this is to speak with a whole-of-market auction finance expert, like the ones we work with. Not only can they tell you how to get finance for an auction property, they can connect you with the lender offering the best deals on loans for auctions.\r\n\r\nFor further information about how to finance buying a property at auction and finding the right broker, call Online Mortgage Advisor today on 0808 189 2301 or <a href="https:\/\/enquiries.onlinemortgageadvisor.co.uk\/match-me-with-a-bridging-finance-specialist\/">make an enquiry<\/a>.