What to consider when buying at Auction
If you are hoping to grab a bargain at auction, there are a few things to keep in mind. Firstly, high street lenders tend to offer long-term funding solutions, so you may find these limiting. So, what other options aside from a mortgage, which is long-term finance, can you use to facilitate your purchase on auction day?
Property auction finance is more commonly known as short-term finance or bridging finance. When properties are sold on a fixed timescale auction finance can be arranged quickly to ensure it’s aligned with the fast-paced sales process of an auction.
Short-term finance certainly has its benefits, but keep in mind these points before proceeding:
• Short-term bridging finance will cost more than mainstream mortgage products
• Administration and legal fees tend to be more expensive
• It’s advisable to have a fallback plan should your repayment strategy fail
• Be aware of all the costs and fees
We recommend that you have your finance in place before you bid, but it’s not mandatory. However, as the winning bidder you are contractually required to pay 10% of the final sale price on the day and the remaining 90% within 28 days.
Lenders will decide how much they are prepared to lend. This will be based on the guide/purchase price and typically they will lend up to around 70%. With any auction however, the guide price can often be quite different to the final sale price. If multiple parties are battling over a property it can end up costing the winning bidder way over the guide price, so you need to be sure you can fund your final bid.
Always check the legal pack in advance too as this sets out conditions of sale for that property, including any additional fees the buyer has to pay on top of the final sale price.
Call us for the right advice
At Aspire Financial Services we specialise in arranging Auction Finance and Bridging Loans. With access to dozens of lenders, call us and ensure you are getting not only the best, but the right deal for you.
Book a free 30-minute introductory call.