What you must know about auction finance?

This type of financing comes in handy when you plan to buy a property at auction. Now, your timing should be perfect so that every step is completed smoothly. You can be an investor who is interested in expanding the property to make more money.

Speedy disbursal is one of the biggest factors behind the popularity of this funding. You cannot ignore the payment deadlines once the hammer comes to rest. Therefore, this funding solution is not typically like a mortgage or other bank loans.

You have to wait for a long to access them, unlike other alternatives. Considering this type of financing is the right decision when you are in a hurry to purchase a property. Finding legit finance providers might take time if you take care of the search process on your own.

Getting in touch with an auction finance broker can save you time and effort. You can take advantage of their knowledge and experience to shortlist the best finance provider. Obtaining financial assistance does not need you to do any legwork at all.

By flipping through this blog, find out if this financing option can cater to your necessities.

An ultimate guide for auction finance

This financing option can be your go-to partner when you have to arrange money for a property purchase on auction. As a borrower, you must look at the various nuances of this funding solution. Do not straightaway borrow funds based on this generalised concept.

Get clarity on the complete picture of this financing option before you approach the loan provider. The below points will help you get an understanding of this funding.

Do they resemble bridging finance?

Yes, because this financing option is a variation of bridging loans. Use them to purchase any property at the auction. It facilitates the buyer to meet the payments within 28 days after the hammer comes down.

When you attend any auction, you will have to win the property through bidding. This financing gives you the financial support to get the property by bidding the right amount. It does not matter if you have funds with you or not ahead of going to the auction.

Arranging funds for this purpose is accomplishable with the help of this funding. The meaning of getting a property on auction is that:

  • Be ready to provide 10% of the purchase price once the auction is over
  • Get funding for a shorter duration
  • Receive up to 70% to 80% of LTV
  • Maximum time limit for repayment would be up to 36 months
  • Relief from upfront fees
  • Pre-payment does not need additional charges
  • Relaxation in credit scores is also accessible

Why is having a clear exit strategy crucial?

An exit strategy is nothing but your plan to repay the loan amount on or before the completion of the term. With a convincing amount of deposit, you can expect to get funds within 14 days after approval. The chances will improve with the amount of deposit.

You can provide another property or asset as security instead of a deposit. It will strengthen your exit strategy and put you in an advantageous position. Since this dealing concerns a property, the most usual exit strategy that works best for it is remortgage or sale of the asset.

The saleability of the property is critical when it comes to grabbing the attention of the finance provider. You can also show the agreement as proof of a feasible exit plan.

Stretching repayment longer, like mortgages, is not possible in the case of this funding. However, the term can linger more than a loan.

How can you use this funding to buy a commercial property?

The working procedure will more or less remain the same if you are getting a business property. Your preference should be this funding when buying a property at the auction. Otherwise, you can seek assistance from commercial property finance for the purchase purpose.

If you are a property developer or a business that looks forward to expanding, this type of financing can be convenient for you. To get quick funding for property purchases, auction finance is the ultimate choice.

Therefore, the main differences between these two types of funding are:

Speed of processing – You cannot think of getting commercial property funding on short notice ahead of the auction. On the other hand, it is possible if you opt for auction finance. The finance provider tailors a deal for you in a speedy manner.

Better rate of interest – The overall price is slightly on the lower side when you choose auction finance. It is a good opportunity for property investors to utilise these funds to buy a property at the auction.

What is the exact procedure to follow for application?

You are free from the hassle of meeting multiple finance providers. This is because you can explore this financing option online with only a few clicks on the mouse.

Does that seem too easy to you? However, the process is like that only if you take the online application route. It should reflect complete and correct details about the borrower.

When information is incorrect, the lender cannot do the needful to issue funding. Based on your preferences, the lender will create the proposal. You have the option to accept or reject the application.

Submit the necessary documents once you accept the finance offer. After that, the legal paperwork will begin. The loan provider will need to conduct a formal evaluation of the property that you wish to purchase.

Once the underwriting process is complete, you can see the deal is complete. No hefty steps are part of the process. Only basic formalities are there to make the procedure as streamlined as possible.

The bottom line

This type of funding involves different ways to decide the rate of interest. You can go ahead to meet the monthly interest by keeping the debt intact. Besides, you can pay the total value that comprises the rolled-up interest and loan amount when the term ends.

You can even consider borrowing the interest the lender will charge on the loan amount for a particular duration.

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