How to finance your auction property?

How to finance your auction property?

Once you have bought a property at auction, the next step is to decide how to finance your auction home. There are number of ways you could do it, we have explained them below:

  1. Pay Cash: If you're fortunate enough not to need auction finance of any kind then this is both cost-effective and may give you a stronger hand when negotiating a price. However, cash is king and by tying it up in a single transaction you may miss other opportunities so bear this in mind before getting your chequebook out.
  2. Get a Mortgage: This is theoretically possible but finding a bank that can complete all their necessary surveys, legals and paperwork within the 28 days you have after the auction is not easy. Most banks will not complete within this time as there are many parties who need to move quickly to enable a bank release the funds. This is a risk and at stake is your 10% deposit from the auction so proceed with caution if you choose this option
  3. Get Auction Bridging Finance: This is probably the most popular option you can use to finance your auction home. Auction finance will get you 70-75% of the purchase price over a term of up to one year and it can be arranged within 7-10 days. Usually there is no interest to be paid monthly and it all rolls up to one large payment at the end when you pay everything off at once - this is great for your cash flow especially if you use this time and this money to refurb the property as this will mean you have no income from it while this is being done.

The key things to consider when working out how to finance auction property are; how you will repay, how long you need it for (be realistic!), what it will cost and what profit you should have in the deal.

If you want to use auction finance to buy a home then please note this is a specifically regulated transaction and there are fewer lenders who will do it so charges may be higher and flexibility less - but it is entirely possible.

Like all matters, a bit of advance planning will help you greatly and save you some costly mistakes.