Using Bridging Loans as Auction Finance
Bridging finance is one of the most popular lending channels on the market for investors purchasing properties at auction. Usually significantly faster and easier to arrange than a conventional loan or mortgage, a bridging loan can also be much more cost-effective.
Just a few of the potential benefits of bridging loans as a form of auction finance include the following:
- Access to the funds required in as little as five working days
- Monthly interest rates from as little as 0.37%
- High LTV (up to 100%) available on many loans, with additional security
- Applications accepted with poor credit or bankruptcy
The flexibility and affordability of bridging finance makes it ideal for purchasing a property at auction. Assuming you have a viable and concrete exit strategy in place, you could be looking at a rock-bottom borrowing costs and an unbeatable investment opportunity.
Factors to Consider Before the Auction
If you plan on using bridging finance to purchase a property at auction, advance planning is essential. Not only to ensure you have a shot at picking up your preferred property, but also to avoid overpaying.
Here are a few important guidelines and factors to consider before heading out to the auction:
- Bridging Loan Eligibility. Under no circumstances should you wait until after the auction (or the very last minute) to find out whether you are eligible for bridging finance. Assessing eligibility will not leave a mark on your credit report, so should be completed as early as possible.
- Consider Your Exit Strategy. This refers to your plan for repaying the loan, which means considering the date by which you will repay the balance and how you will raise the funds to do this. Your lender will want to see solid evidence of a workable exit strategy, if you are to be offered a competitive loan.
- Fees and Commissions. The winning bid on any property at auction is never an accurate representation of exactly how much needs to be paid. There are various additional fees and commission to take into consideration, which can significantly increase the overall balance payable.
- Stick to Your Budget. Irrespective of how desirable any given property is, getting into a bidding war and paying more than you can afford to is inadvisable. Always establish your budget ahead of time and stick to it. Never let your emotions get the better of you on the day.
- Consider a Private Offer. Lastly, it is worth remembering that when a property fails to sell at auction, you can still make a private offer either directly to the owner or via the auctioneer. As the seller did not achieve the price they were expecting for their property, they may be willing to accept a significantly lower bid.
If considering bridging finance for an auction property purchase, consult with an independent broker at the earliest possible stage. In doing so, you will be able to assess not only your eligibility, but also the affordability of bridging finance and whether it is suitable for your requirements.
For more information or to discuss your requirements in more detail, contact a member of the team at UK Bridging Loans anytime for an obligation-free consultation.