You’ve got your sights set on buying a property that’s soon to be auctioned. But you need finance. How much can you borrow? And how quickly can you get the funds released? Peter Barnes, consultant mortgage broker explains.
Buying a property at auction is a much quicker process than a traditional purchase, so it is important to be prepared. An auctioneer’s catalogue tends to be available 2-3 weeks prior to the auction date, so use this to your advantage.
- Make an appointment to visit the property. If possible, I would recommend taking a qualified surveyor with you. A qualified surveyor will be able to point out any structural problems or any other issues related to the state of the property.
- Read the legal pack! An auction purchase is legally binding. It is important you fully understand the scenario and what you are agreeing to. Ask your solicitor any questions if you are unsure.
- Get your finance pre-agreed. If you need help sourcing finance for this purchase, now is the time to speak to a mortgage adviser (ahem!... Hello!). It is advisable to get an agreement in principle to take with you on the day.
- Get your deposit ready. If your bid is successful you will be asked to pay a 10% deposit on the day. You are then given 28 days to find the remainder and complete on the purchase.
Auction finance rates and terms
We can arrange the following auction finance for commercial property:
- Rates from 0.74%
- Terms from 12 – 18 months
- Lender arrangement fees from 1.5%
- Exit fees from 0%
- Lending up to 85 years old
- Up to 70% loan to value
- Lending to individuals, limited companies, LLPs and partnerships
Acceptable property types
There’s always a lender for most types of property. Here is a selection of the property types we have arranged auction finance for in the past:
- Semi-commercial / mixed use property (i.e. flats above shops)
- Barns
- Hotels
- Public houses
- Restaurants
- Offices
- Industrial units
- Distribution centres
- Nursing homes
Don’t worry if your property type isn’t listed above. This is just a selection to give you an idea on the variety of properties we can help with.
Applying for finance – the process
- Initial application. Call us on 0345 345 6788. We will work with you to put your application together for submitting to the lender.
- Agreement in principle. Once we have received an agreement in principle from the lender we will forward this on to you for taking to the auction.
- Prepare your paperwork. Before attending the auction, make sure you’ve got all the necessary documents needed to support a full loan application, i.e. auction pack, proof of identity, address and income. We’ll let you know what to prepare.
- Winning bid? If you’re the successful bidder, call to let us know soon as possible and we will submit the full application on your behalf.
- A valuation will be instructed. Usually we arrange this on behalf of the lender.
- Solicitors will be instructed. The lender will instruct their legal representative. You must instruct yours - most likely, they will be different from the lender’s solicitor.
- To-ing and fro-ing. This is our job! We’ll work with all parties – you, the lender, the valuer, the solicitors - to keep the deal on track.
- Completion. When all goes to plan, the funds will be released to you within the 28 day timescale.
Exiting the auction finance
When the time comes for you to repay the auction finance, you’ll most likely have two options:
- Sell the property to repay the loan. Perhaps you’ve carried out development works to increase the value and now you are looking to sell the property on.
- Refinance onto a commercial mortgage. If your plan is use the premises for your own business or lease it to tenants, then you’ll need to refinance onto a longer term, more cost-effective rate. This is where we come in. Get in touch and we’ll find funds to fit your circumstances. The rates and terms offered will depend on the property type, the location, the tenant, your experience, your circumstances. Once we know these, we’ll be able to give you an idea of what you can achieve.
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