What is Auction Finance?
Auction finance is a type of bridging loan that helps bridge the gap between purchasing a property at auction and securing long-term financing or selling the asset. It is specifically designed to meet the tight timelines of property auctions and can provide funding for up to 12 months.
Key benefits include:
• Fast Access to Funds: Quickly secure the necessary funds to meet auction deadlines.
• Flexible Exit Strategy: Use the loan term to refinance, renovate, or sell the property.
• Wide Range of Properties: Auction finance covers various property types, from residential homes to commercial units.
Essential Features of Auction Finance
Key Features of Auction Finance
• Fast Decision in Principle: Many lenders provide a decision in principle before the auction day, enabling confident bidding.
• Flexible Loan Terms: Loan terms of 6 to 12 months allow time to arrange refinancing or sale.
• Loan Amounts and LTV: Loan amounts are based on the property value, with loan-to-value (LTV) ratios typically ranging from 65% to 75%.
• Competitive Interest Rates: Rates reflect the short-term nature of the finance but remain competitive for quick funding.
• Tailored Solutions: Loans are customised to meet a variety of needs, from residential to commercial property finance auctions.
The Importance of Auction Finance in Property Auctions
Auction finance, also known as a bridge loan, is a short-term loan specifically designed for purchasing property at auction. Here’s why it’s crucial:
Speed of Funding
Auctions usually require completion within 28 days, while traditional mortgage processes can take months, making them impractical. Auction finance allows you to complete your property purchase within the required timeframe.
Flexibility with Property Types
Properties sold at auction often include uninhabitable homes or commercial spaces that require significant renovation. Auction finance lenders specialise in these types of properties, offering the flexibility needed for such investments.
Certainty of Completion
Failing to secure funding can lead to losing your deposit and incurring penalties. Auction finance gives you the confidence to complete the transaction on the day of the auction.
If funds are not secured, you risk losing your deposit and facing penalties. Auction finance offers the assurance needed to successfully complete the purchase on auction day.
The Consequences of Failing to Complete an Auction Purchase
Failing to complete your property purchase within the auction’s deadline can result in significant consequences:
• Loss of Deposit: The 10% deposit is forfeited.
• Legal Action: Sellers may pursue legal penalties.
• Additional Costs: Re-auctioning the property incurs extra fees, and your standing with auction houses may be damaged.
Auction finance helps mitigate these risks, ensuring a seamless property auction process.
The Benefits of Working with a Specialist Broker
A broker experienced in finance auctions can:
Save Time
Rapidly connect you with lenders.
Secure Competitive Terms
Tap into an extensive network of lenders to secure the best deals.
Simplify the Process
Manage paperwork and ensure compliance with lender requirements.
FAQs About Auction Finance
What types of properties are eligible?
Auction finance supports residential homes, commercial spaces, and renovation projects.
Can I use auction finance without a long-term exit strategy?
Yes, but lenders prefer applicants with a clear plan, such as refinancing or resale.
How quickly can funds be accessed?
Many lenders release funds within 48–72 hours, depending on documentation.
What happens if I can’t repay the loan within 12 months?
Some lenders may extend the term or transition you to long-term financing, though fees may apply.
Why Choose Compare the Mortgage for Auction Finance?
At Compare the Mortgage, we specialise in property auction finance and bridging loans. Here’s what makes us stand out:
Expert Guidance
Assistance from application through to funding.
Tailored Options
Customised terms tailored to your investment objectives.
Fast Access to Funds
Easily meet deadlines.
Competitive Rates
A network of reliable auction finance lenders.
Get Auction Finance Today
Don’t let tight deadlines or complex financing stop you. Contact Compare the Mortgage to discover fast and flexible auction finance solutions for your next property auction in the UK.