Blog Post

What is property auction finance?

Publish Date: 29 August 2024

By Jade Shrubsole

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Further reading

The Two Main Types of Property Auction

EIG Property Auctions: Maximising Your Property Investment

Property auction finance is a specialised type of short-term lending designed to help buyers quickly secure the funds needed to purchase properties at auction. Given the typically tight timeframes associated with property auctions - usually requiring full payment within 28 days. Auction finance offers a streamlined solution to meet these deadlines.

Auction finance can be used to purchase a wide range of auction properties:

• Residential investments, including HMOs and multi-lets
• Semi-commercial property
• Commercial property (both as an investment or owner-occupied)
• Land

Here’s a breakdown of how it works and its key aspects:

Key Features of Property Auction Finance:

Speed of Approval:

Lenders providing auction finance understand the urgency of auction purchases. They often offer fast-track approval processes, sometimes within a matter of days.

Short-Term Nature:

Auction finance is usually a form of bridging loan, designed to bridge the gap between the purchase of the property and the availability of longer-term financing or resale of the property. The loan terms typically range from 1 to 12 months.

Loan-to-Value (LTV) Ratios:

LTV ratios for auction finance loans can be high, sometimes up to 75% or even 85% of the property’s value. This allows buyers to leverage the property’s value to secure necessary funds.

Higher Interest Rates:

Due to the short-term nature and the speed at which these loans are provided, interest rates are generally higher than standard mortgage rates.

Flexible Repayment Options:

Repayment terms are often flexible, with options to repay the loan in full once longer-term financing is secured or the property is sold.

Property auction finance is a vital tool for buyers looking to purchase properties at auction, providing the necessary funds quickly and efficiently to meet the stringent payment deadlines associated with such purchases.

If you’re ready to purchase an auction property but need a helping hand with your finance, contact our friends at Together Finance and you could be approved in just five minutes!