How to finance a property at auction

financing property at auctionHow to finance a property bought at auction

Forget any episode of ‘Homes under the Hammer’ that is not how real life works. When buying a property at auction you typically only have 28 days to complete on the purchase, which means being a cash buyer or having the finance in place before you bid.

Having the finance in place to buy at auction is where specialist Auction Finance comes into it’s own. It gives you the assurance and confidence to bid at auction and win the opportunity you want

How auction finance works

If you want the easier video version of this post then you can watch it here.

The key is to take action in advance.

When you get the list of lots going to auction and have done your due diligence you will know which units you want to bid on and have a good idea of where the numbers work.

Finance can be put in place by using the lot number, getting the outline details and getting a finance line agreed based on the maximum amount of finance possible on that property. This means you know what you need to put in and can bid with the confidence of knowing you have the finance agreed to complete the purchase.

The key part to most auction finance is speed. Once the hammer comes down you will have a typical 28 day period to complete. Auction finance moves quickly and is designed to get the property purchased and free you to do what you want with the unit.

Auction finance is not a long term solution, it is about getting the purchase done and allowing you the freedom to add the value you intend to the property.

As a guide:

  • 70-75% loan to value mortgage
  • Agreed based on the lot number
  • Typical 3-12 month loan period
  • Interest is rolled up during the loan period
  • You need circa 30-35% cash deposit

Once the purchase is done then it is recommended you already look at the next step, whether that be to flip and sell, or whether that be to improve and let out. If the latter then we always recommend getting the long term buy to let mortgage started as early as possible, often doing both the buy to let and auction finance at the same time.

If you want more details on how to finance a property at auction then get in touch and we can take you through the process.

By Dave Farmer


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