Auction

Time can often be tight when it comes to a property purchase and speed is the main advantage bridging finance can offer compared with high street banks.

Independent buyers seeking to find a bargain at auction are turning to bridging loans to meet the 28 day deadline for completion set by most auction houses. Once they own the property they are able to re-mortgage in order to repay the bridging loan.

A 10% deposit of the bid price will be required for auction day. If the client does not have the 10%, we can raise the funds by releasing equity on any existing properties prior to auction.

Many clients looking at purchasing an auction property require 100% of the bid price plus renovation costs and this can be achieved by using both the new auction house and the clients existing house as security (subject to equity).

Criteria

• Market Value
• 100% LTV (with additional security)
• 70% LTV (without additional security)
• Valuation report required on all secured properties

Case study

A client wanted to purchase a property at auction and was needing to raise a 100% of the bid price plus costs for renovating the property, prior to putting the property up for sale.

She had little funds of her own. By using the auction property as security plus her existing property as additional security, enough funds were provided to purchase the property, renovate and pay for estate agents fees.

The deal was completed within the 28 day period set by the auction house and the client had 6 months to complete and sell the property in order to repay the bridging loan.

It is advisable to use a specialist property lawyer in cases where bridging is necessary and to provide all the relevant documentation as quickly as possible. This is to ensure that timescales are met and any potential problems spotted as early in the process as possible.