Auction bridging finance

When purchasing properties at auction, understanding the specific financial products available, like auction property loans, is crucial due to the tight timelines involved. Auctions typically operate under two main formats: the traditional auction, which requires completion within 28 days, and the modern auction, allowing for a 56-day completion period. These accelerated timelines necessitate efficient financial and legal preparations to secure funding promptly.

Importance of Indemnity and Automated Valuations

For traditional auctions, where the 28-day timeframe can be particularly challenging, borrowers often benefit from lenders who accept full indemnity for legal searches. This approach can significantly speed up the legal process by bypassing some of the detailed searches that typically delay proceedings. For both traditional and modern auctions, using automated valuation models (AVMs) can expedite the property valuation process of a bridging loan. AVMs eliminate the need to schedule and wait for a physical inspection, thus reducing the overall time from application to loan approval.

Loan to Value (LTV) Explained

Loan to Value (LTV) is a critical factor in auction property loans, representing the ratio of the loan amount to the actual value of the property being purchased. Typically, unless borrowers have extra security lenders offer LTV ratios up to 75%-85% for auction properties, which means the borrower must provide at least 15-25% of the property’s price as a down payment. Higher LTVs might be available, but they often come with higher interest rates or additional lending criteria.

Key Considerations for Auction Property Loans

1. Speed: Lenders specialising in auction property loans understand the need for quick decision-making and offer expedited processing to meet auction deadlines.
2. Indemnity Acceptance: Choosing lenders that accept full indemnity can avoid delays caused by traditional property searches, making it feasible to meet the 28-day deadline in traditional auctions.
3. Automated Valuations: Opting for lenders that use AVMs can further reduce the time taken for loan processing, ensuring funds are available swiftly to complete the auction purchase.