KIS Finance are independent bridging loan brokers who specialise in providing auction finance.
Our auction finance lending criteria is:
Auction finance bridging loans are available for:
We have a select panel of bridging lenders who are experienced in providing loans to fund auction purchases. They understand that:
Auction finance is a type of bridging loan facility that can be used to fund the purchase of an auction property or plot of land.
A bridging loan is a short-term, property backed funding facility. Bridging loans can be arranged quickly which makes them a fast and effective solution to auction purchases where you are given a shorter timeframe to complete.
With traditional auctions this is just 28 days, and for online auctions you are given 56 days.
Bridging loans for auction purchases start at 0.47% per month.
The interest rate for auction finance is affected by:
For most bridging loan facilities, a lender’s arrangement or facility fee will be added to the loan.
This is typically around 2% of the net or gross loan amount.
For larger bridging loans this fee can be reduced to as little as 0.5%.
To set up a bridging loan, the lender will need to carry out a valuation of the property being used as security. The cost of this will be dependent on the value of the property.
This is usually the only upfront cost when you take out a bridging loan and you will pay the lender directly.
This cost may be reduced if a desktop or drive by valuation can be done, or if a recent valuation has been carried out.
You will need to instruct a solicitor to carry out the legal work required for setting up a bridging loan. You will also need to cover the lender’s legal costs too.
Legal costs can vary depending on the lender and the solicitor you choose.
Occasionally, an exit fee similar to the arrangement fee can be applied and charged when you redeem the loan.
Most bridging loan facilities that we arrange do not charge exit fees.
Most bridging loan brokers will charge a fee for their service – we do not charge broker fees!
When you place a successful bid on a property in a traditional auction (where you go to the auction in person rather than online), you have 28 days to complete the purchase. Contracts are exchanged on the day of the auction with a minimum deposit of 10% being required on the same day.
This means that you are legally obligated to complete the purchase within the following 28 days, otherwise you will lose your deposit and possibly be faced with hefty penalties.
With the modern method of auction, i.e. online property auctions, then the process is a little bit different.
When you make a successful bid, you don’t have to exchange contracts immediately. Instead you will pay a reservation fee which is non-refundable if you pull out of the purchase. This is usually a percentage of the purchase price; sometimes up to 5%.
You will have 28 days to exchange contracts, and then a further 28 days to complete the purchase; so you will be given a total of 56 days from the date of the auction.
As bridging loans can be arranged much faster than mortgages and other property secured loans, bridging finance can offer the ideal solution to fast auction purchases.
Most mortgage products will take two to three months to arrange, which means it’s very unlikely that you’ll have the money in time to complete the purchase within the 28 days required of a traditional property auction.
The bridging loan can be secured against the property you’re buying, a property that you already own, or a combination of both.
A bridging loan will allow you to purchase the property like a cash buyer.
Auction finance can be used to purchase residential and commercial properties and land at auction.
Auction finance can also be used to fund any develop work you wish to carry out on the property or land before refinancing or selling on.
There’s a number of different ways that you can use auction finance, including:
Yes, using a bridging loan can give you the option to borrow 100% of the purchase price if you have other properties to use as additional security.
With bridging finance you can typically borrow up to 75% of a property’s value. So if you were to secure the bridging loan just on the property you’re buying at auction then you would be able to borrow up to 75% of the purchase price (gross). This means you would need to put in at least 25% cash.
However, if you own other properties that have enough equity then you may be able to use these as additional security to increase the amount you can borrow.
When you use more than one property you can borrow up to 75% of the total value of properties being used.
You have successfully won a property at auction for £150,000.
Your home is worth £500,000 with a £200,000 mortgage.
The assets in total are worth £650,000.
You can borrow up to 75% less the mortgage.
75% of £650,000 is £487,500 then you need to takeaway the £200,000 outstanding mortgage balance.
This means you can borrow up to £287,500 gross – enough to fund the auction purchase in full.
If you’ve already placed a successful bid and won an auction purchase then you will need to complete within 28 days.
This is where we can help.
Bridging can be arranged in as little as 48 hour which means we should be able to get funds to you within the required timeframe.
Please give us a call if you have already placed a successful bid and need funds within the next 28 days.
To save yourself any stress or worry then you should come to us before the date of the auction.
We know that time is of the essence when it comes to auctions, so we can check your eligibility and pre-approve your application before you bid.
This means you can bid with confidence knowing that your funding will be sorted.
Once a bridging loan has been used to purchase the auction property as a cash buyer, you have different option in terms of repayment.
A typical bridging loan term is 12 months, with some bridging lenders able to offer 18 month terms. This will give you enough time to carry out any plans for the auction property and to arrange your exit plan for the bridging loan.
The most common methods of paying back a bridging loan are:
A typical bridging loan term is 12 months, so this will give you time to get a suitable mortgage product arranged. This could be a residential mortgage, a buy to let mortgage, or a commercial mortgage.
The mortgage facility will be used to repay the bridging lender and will be secured on the property that you have purchased.
Refinancing a property that you already own to release funds is also a viable bridging loan exit strategy.
You can use a bridging loan to purchase a property at auction, carry out renovations, and then sell on to repay the bridging loan and make a profit. If you don’t have the money for renovations, then you may be able to borrow more than the value of the property you’re buying if you have additional security. This could be your home or another investment property that you own.
The sale of a separate property that you own can be used to clear the bridging loan facility.
If one of these options alone isn’t enough to clear the bridging loan, then you can use a combination of sale and refinancing. For example, you could sell a property that you already own and take out a mortgage on the auction purchase.
If you change your mind and want to pull out of an auction purchase after a successful bid, then you will be in breach of contract.
Once you’ve exchanged contracts on a property purchase, it becomes legally binding.
If you pull out of the purchase after this then you will lose the deposit you put in and you may be held liable for any costs incurred by the seller too.
So, it’s important that you do all of your research before the auction and get your finances lined up so there aren’t any delays. Never bid on a property hoping to ‘figure it out’ afterwards.
In order to ensure that you can complete an auction purchase in time, you need to make sure you are fully prepared.
Here are four things that you need to do to before going to a property auction:
You should never purchase a property that you haven’t seen in person and this applies to auction purchases too. We would recommend viewing the property twice if you can.
You may think that it makes sense to get a survey done after winning the property so you don’t waste the money if you don’t win. However, as you are legally obligated to purchase the property after a successful bid, it’s important to make sure there aren’t any issues with the property before you go to auction.
The cost of the survey will depend on what type you go for, but it will be worth it if you do discover issues with the property that would cost thousands to fix.
It’s important to instruct a solicitor to look over the legal pack provided for the property and to carry out the conveyancing work.
You need to decide and organise how you will finance the purchase if you win. Make sure you get a decision in principle before going to the auction – this could be for a bridging loan or a mortgage.
You also need to make sure you have the deposit ready to go as this will need to be paid on the day of the auction.
Each member of our auction finance team has at least 10 years experience in bridging loans and auction finance, so you can trust us to get things right.
As an independent broker, we are not tied to any one or group of lenders. This means we can search the whole market to ensure you get the most competitive and suitable bridging loan facility.
Some lenders will also only deal with brokers and not directly with customers. This means, by using us, you will have access to a wider range of products than if you were to source your own funding.
We will be with you every step of the way to help with your application process and answer any questions or concerns you have along the way.
We can also present your application in the best way to lenders, meaning we can boost your chances of getting accepted if there are any negative factors that could potentially affect your application.
Most brokers will charge a fee for their services, however, we do not!
This means you will benefit from all of our years of experience and have access to a better range of products at no extra cost to you.
Last updated: 05 April 2022 | © KIS Bridging Loans 2020
