Auctions are becoming increasingly popular as a way of purchasing property. With everyone from first-time buyers to experienced investors drawn in by the benefits that the method can offer, whether that’s the allure of finding a good bargain or the convenience of the quick and easy process. However, while the speed and security are attractive to some, it could make others more hesitant out of concern for the time available for securing funds.
Contrary to popular belief, auctions don’t require you to pay cash upfront other than a deposit at the fall of the hammer, and there are many alternative ways for you to finance your purchase. Here at SDL Property Auctions, we believe in making our auctions as accessible as possible, so no one has to miss out on finding their dream property.
From mortgages to bridging loans, we can help you find a wide range of ways for you to fund your purchases. To share a better understanding of your options, we’re going to take you through all of the ways you can apply for finance when buying a property at auction below.
What is auction financing?
Property auction financing is a bit different from your regular loans as they’re specifically designed to be fast-working to help facilitate purchases made at auction (usually within 28 days or less). The purpose is to cover the initial purchase price of the auction property and usually, the loan will be paid back within 12 months of the winning bid, depending on your agreement with the lender. This helps to make auctions much more accessible for a wide range of buyers and circumstances.
To take out auction finance you’ll also need an ‘exit strategy’. This simply means the lender will have agreed and be satisfied with the way you intend to pay off the loan. This could be in many different ways from renovating the property and renting it out or selling an existing property.
Speaking to a financial advisor is a great way to help make the process a little bit less daunting, so don’t be afraid to get in touch with our expert team, and we can help suggest companies for your property auction financing.
Ways to finance buying a property at auction
Below you can find what options we have available for those looking to secure a property at auction.
Getting a mortgage for a property auction
That’s right, mortgaging a property is applicable for buying at auction. It’s a great way of financing a purchase for those who are eligible and don’t have the cash outright. For this, you’ll need to get a decision in principle from a mortgage provider, also known as an ‘agreement in principle’. With this, a decision will be made on how much you can borrow based on income and other finances so you’ll have a better understanding of what you can afford on the day.
However, it’s important to know that lenders will only offer you a mortgage on mortgageable properties, which is true for all methods of purchasing a property. This means that those looking to buy or renovate a particular property may have to look for other methods of financing such as the ones mentioned below.
Getting a mortgage for auction can be a bit different depending on the type of sale, for example:
Mortgaging with unconditional sale – If the property is listed as an unconditional sale you’ll be expected to pay a 10% deposit on the day and then pay the remaining balance within 30 days (depending on the specific property terms, as this can sometimes vary). We wouldn’t recommend getting a mortgage for this type of sale as the turnaround time is too quick for lenders to arrange a deal.
Mortgaging with a conditional sale – this is typically the better option when thinking about getting a mortgage at a property auction because the completion time is longer being (usually) 60 days. This time frame allows you to carry out the necessary paperwork involved.
If you want to learn more about getting a mortgage for buying at a property auction, then you can read through our full guide.
Bridging loans for auctions
Auction finance lenders are typically more accessible when it comes to the properties they will offer loans on. Mortgage providers have a strict set of guidelines to meet, meaning that for those who are in different circumstances to your typical homebuyer, such as the retired or self-employed, it may be a bit of an upward battle. Luckily, auction finance lenders are there to give potential homeowners the chance and will consider you even if you are;
- Self-employed (part or full-time)
- Working more than one job
- Claiming a pension or receiving benefits
- Investing in a property or commercial space.
These loans are typically given to you within a 7-10 day window after putting in your application to meet the needs of fast-paced auction buying and you can pay back with lump sums within 12 months of placing the winning bid. It’s ideal for those who don’t have the money outright but can afford it over a longer-term basis. If you want to learn more about getting a bridging loan then you can read more on our how to finance for an auction property page.
*It’s important to note that failure to repay any loans may result in repossession of the property.
Benefits of auction financing
Now we know a bit more about the ways you can approach auction financing, let’s discuss what benefits they can offer to buyers so you know you’re picking the right option for your property hunting.
Auction mortgaging benefits:
- Great for people who can pay long-term instead of short-term
- Comes with less interest than getting a loan.
Bridging loan benefits:
- Opens up the doors to more buyers (self-employed or retired buyers)
- Fast turnaround times
- Can get finance on investment and commercial properties
- Bridging loans can be used for renovation projects.
Our auction finance partners
Here at SDL Property Auctions, we are proud to partner with Together, which specialises in mortgages and loans designed with property auctions in mind. Their dedicated team have a wealth of expert knowledge in financing support.
Together prides themselves on providing speedy and simple auction financing for a wide range of properties from renovation projects to semi-detached homes and plots of land. They help you take a common-sense approach so you can bid with confidence on the day of the auction.
Finance your property with SDL Property Auctions
We strive to make property auctions as accessible as possible for both investors and experts alike. Whether you’re renovating a project to rent or getting onto the property ladder with your first home, we offer a wide range of financial short-term aid to ensure as many people as possible can enjoy buying at auction.
If you want to know more about the financial options available or get expert help on which option will be best for you, then you can contact our expert auctions team, who can point you in the right direction for more financial support and advice.