Auction Finance

The simplest way to achieve auction finance is to arrange your mortgage "in principle" in advance.

When you are successful at auction you are usually expected to pay a 10% deposit there and then. Assuming that you arrange 70% financing you will need to pay the remaining 20% deposit on completion, usually within 14 to 28 days. Timescales can be tight so it's a good idea to have your financing prearranged and your solicitor on notice to act quickly.

It is also vital to ensure the property that you intend to bid on is habitable and mortgageable in its current condition. If it isn't the mortgage lender will probably insist on placing 100% retention on the mortgage offer. This means that they will not advance funds until the property is ready for letting. There are two ways around this problem. The first is to complete using your own cash. However, you might not have the full purchase price available to make this a viable option; if this is the case bridging finance could be your answer.

DO NOT make the mistake of buying the property before you have the mortgage arranged. Lending criteria has changed substantially over the last 18 months and it is now virtually impossible to persuade a lender to allow you to mortgage a property that you have purchased for cash within 6 months. If the lender has arranged a mortgage based on the purchase price and agreed 100% retention this is a different matter.

If you have unlimited cash resources then now could arguably be a great time to go on a buying spree. However, most of us have limited resources and have to balance what is affordable against what is achievable. If you have a strategy of purchasing as many properties as possible whilst there are so many bargains around you may wish to consider taking further advances or remortgaging. The benefit of doing so is to release the deposits you have tied up in your properties to buy some more. Remember though, this is only possible after six months of ownership. Once this period has expired you could be in a position to borrow against what will hopefully be a much higher open market valuation of the property than the price you paid at auction. However, if your plan is to remortgage you will need to weigh up the cost of arranging the remortgage and redemption penalties on the mortgage used to purchase the property against the alternative option of bridging finance.

To find out more or to discuss your auction funding requirements contact us today.

Click here to view our Top Tips to purchasing property at auction.