What is auction finance?
Auction finance is short-term finance to assist buyers to purchase a property at an auction, normally with the intention of refurbishing it to increase the value to sell or remortgage and rent out. This is processed in the form of a short-term loan (STL), also known as a bridging loan.
If successful at an auction, the deposit (normally 10%) is payable and you must then complete the purchase normally within 28 days. A bridging loan can help you do this and you are advised to always source your funding before going to an auction.
Lenders can instruct valuers and solicitors the same day if you already have an Agreement in Principle in place – it makes the process much smoother. You also know that you are going to the auction with pre-agreed, credit-backed funding.
Some people go to auctions, buy a property and then worry about how they are going to pay for it – which could make it harder for them because there could be credit or funding issues. All of this could be avoided by working with your broker to source finance ahead of time.