Funding Your Auction Purchase

Funding a house purchase at auction requires easy access to finance, as you must pay a 10% deposit as soon as you have one the bidding and the remaining 90% within a fixed schedule, usually 20 workings days or less.  Consequently, before bidding you have to ensure that your funding is both secured and available. Your options are therefore cash, specialist mortgage finance or bridging finance.

While cash (in the bank) is secure, and should provide speedy accessibility, it needs to be coming from an easy to access account (not tied in savings), and you will still have to pass source of funds tests from your solicitor’s essential anti money laundering checks

Although mortgage finance is available for auction purchases, with the tight auction completion schedule of twenty working days or less, it is best to arrange it before the auction. With the appropriate funding amount, for that exact property, approved prior. Then, following the fall of the gavel, the broker and lender will have to swiftly finalise the mortgage processing and make funds available in time. If the valuation or legal paperwork takes too long, you risk losing your 10% deposit and penalties.

Bridging finance is used to provide a fast flexible solution to buy residential property, as well as commercial assets and land. Often preferred for renovation-heavy properties or uninhabitable properties, which don’t meet regular mortgage lenders’ criteria and may therefore be deemed unmortgageable. They can also cover additional costs, including legal fees, stamp duty, and auction fees. Most buyers use a bridging loan to enable them to complete on their purchase then undertake the refurbishment works before refinancing onto a traditional mortgage.

Links:

• https://www.auctionessentials.co.uk/bridging-finance
• https://www.auctionessentials.co.uk/mortgages