Finance

need finance to help with your purchase? ask our team

Finance

need finance to help with your purchase? ask our team

Many people assume that because a property is being sold at auction, the only people who can purchase are cash buyers. In fact, the majority of lots we sell are purchased by buyers using some kind of finance. This may be in the form of a regular mortgage from a mainstream lender, a commercial loan, or short-term bridging finance.

One may have sufficient funds to purchase outright, however most experienced property investors will choose to use a smaller amount of their money as a deposit and to use finance to purchase multiple properties.

For example, with £100,000 to spend, an investor may seek a single property that will generate an income in the region of £7,000 p.a.

However, were the £100,000 used as a 25% deposit to purchase four properties, capable of generating a total of £28,000 per annum, with 75% mortgages on each one, not only is that investor hoping the net income after mortgage repayments is greater, but there will also be the expectation that over time there will be a fourfold increase in the capital growth. Suppose after 6 years the value of each property increases by 25%, instead of seeing a benefit of £25,000 on the one property, the benefit on four will be £100,000!

An applicant with a proven track record with an existing portfolio and a large deposit may find that securing finance on residential property so straightforward that they will wait until after they have successfully purchased at auction before applying for the mortgage.

However, for a less experienced buyer, especially one with a relatively small deposit, our advice will be to speak with a lender or financial advisor before bidding. The buyer will need to explain that the property is being sold at auction and ask what timescale the lender will require to have completion monies available. If needs be, they can ask us auctioneers for an extension prior to the auction, but if in doubt, don’t bid – we don’t want you losing your deposit.

Commercial loans on commercial and mixed use properties are more expensive than a residential mortgage from a mainstream lender.

However, for both residential and commercial property, different lenders will vary in their considerations, taking differing views on various types of risk. They may expect to find that leasehold properties with short leases, absentee freeholders, high-rise buildings, or any property that is deemed to be of non-standard construction, suffering from structural defect or in a very poor condition to be outside all their lending criteria. Also, it is important to have a solicitor review the legal pack to check there won’t be anything untoward in the paperwork such as a defective title.

However, a property may still be a viable option even if mainstream lending won’t be available in the short term. Auction finance, or bridging finance, will be more expensive, but because borrowing may be harder and more expensive, the number of other bidders may be a lot fewer, and those who are interested may also be calculating the higher costs. It makes little sense not to bid on a property which could be purchased well below your own valuation just because the cost of borrowing is higher, if the overall amount is still at or below what you feel the property is worth.

In such circumstances it is worth asking what the cost of borrowing will be, and below are three options:

Together Finance

0330 127 3694

We’re Together. For 50 years we’ve helped people, businesses and property professionals unlock their ambitions with our common-sense approach to lending.
It means that we can help to open doors, even when others can’t. So when you need a relationship with the right finance partner, our door is always open.

togethermoney.com

United Trust Bank

bridgingadmin@utbank.co.uk

020 7190 5555

United Trust Bank (UTB) is a multi-award winning specialist bank which has been providing dependable property finance solutions since 1955.

The Bank created its Bridging Finance division in 2010 and since then has established a reputation for providing fast, flexible and reliable regulated and unregulated bridging solutions for a wide variety of customers and even wider variety of uses.

utbank.co.uk

Mike Ward Mortgage Services

max@mwms.co.uk

07740 844864

We are a Whole-of-Market Brokerage with access to a vast panel of Lenders providing Finance for your next Auction property project.

Our mortgage professionals will provide expert industry insight, saving you time and money and making your home buying experience as smooth as possible.

Mortgages Made Simple.

mwms.co.uk

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Robinson & Hall LLP. Regulated by RICS.
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Registered in England as a Limited Liability Partnership number OC310546. Registered Office. Unit 1, Highfield Court, Highfield Road, Oakley, Bedford MK43 7TA.
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Price Information

*Guides are provided as an indication of each seller’s minimum expectation. They are not necessarily figures which a property will sell for and may change at any time prior to the auction. Each property will be offered subject to a Reserve (a figure below which the Auctioneer cannot sell the property during the auction) which we expect will be set within the Guide Range or no more than 10% above a single figure Guide.

Additional Fees Information

Please be aware there may be additional fees payable on top of the final sale price. These include and are not limited to administration charges and buyer’s premium fees payable on exchange, and disbursements payable on completion. Please ensure you check the property information page for a list of any relevant additional fees as well as reading the legal pack for any disbursements.