When you’re looking to buy a house through an auction, you’ll need to be able to pay up a 10% deposit for the property on the day, and then pay the rest of the cost within 28 days to settle into the new home without any problems.
Now, the first thing people might try and do is mortgage their home to find the funds for this course of action, but it isn’t always as straightforward as this. To make the endeavour possible, some people need to use what is called auction finance. We’re taking a closer look at it, to try and see what you’d need to do if the situation arose that meant you would need auction finance.
Auction funding is available up to 80% loan to value at rates from around 0.44% per month if a fast completion is required.
How Does Auction Finance Work?
To begin with, it’s important to remember that auction finance is a rapid way of getting the funding together when it may not be possible for your mortgage company to sort out the mortgage within the 28-day window.
What you’ll come to find with auction finance is that it usually allows you to get access to around 70 – 75% of the purchasing price, which means that you’ll need to find the remaining amount for a deposit. Before the auction begins, you should speak to a finance broker and see if you can get finance for the property you intend to buy.
This is dependent upon several factors. These can include things like the location of the property you intend to try and buy, as well as the type of property you’re looking at, for example, if it is a bungalow or a three storey property.
As well as this, how you intend to repay the loan will also be considered when assessing your chances of getting financed, and the amount of money you want to borrow is also going to be considered. To a lesser degree, it is not uncommon for finance brokers to look at your credit score, as well as your experiences in this field, although the former is not a massive influencing factor.
What Happens Next?
Once the finance broker has looked at the above information, you’ll be made an offer on principle, which is an offer you can take with you to the auction and make to try and get the property.
If you do manage to get the property in the auction, the firm who is financing you will step in and make a formal evaluation of the property, and then they will be able to make you a formal offer for your finances. From there, it’s usually a case of allowing specialist solicitors to step in and begin sorting out the paperwork for you.
Overall, this is a basic explanation of how auction finances work. It is usually a question of being evaluated to see if you’re suitable for the finances and then winning the property in the auction so that an official offer can be made and accepted. If done correctly, the entire process is relatively straightforward and can help you to get the property you’re looking for.
The cost of auction finance is generally no more than standard funding. However, it is important that the only lenders that will generally complete within auction contract time scales are bridging and short term lenders. Rates start at around 0.44% per month for very low loan to value deals.