A guide to auction bridging loans

Thursday, 18 August 2011 12:14

Buy auction homes with bridging loans

Buy auction homes with bridging loans

Visit a property auction and you can purchase real estate for significantly less than its open-market value.

While attending this kind of sale could allow you to acquire both commercial and residential developments at great prices, once the gavel has been struck to signal that you've made the winning bid you'll need to lend some thought to how you will fund your purchase. And it is in such cases that bridging finance can prove an effective option.

Besides having the potential to purchase properties for bargain rates, perhaps one of the other main benefits of auctions is that once you have agreed to acquire a development you do not have to go through as much paperwork compared to the traditional way of buying.

This certainly speeds up the entire process but it also means you are unlikely to have enough time to get a mortgage sorted out. Once a final bid on a property has been accepted you will only have a few weeks – usually no more than 28 days – to gather the funds with which to complete the transaction.

Most people bidding at auctions usually have some money stored up to use as a deposit but to raise the rest of the money in order to pay the person or company you are buying from in full, you will most likely need a bridging finance deal.

Arranging a mortgage can be a lengthy, arduous process and usually takes at least several weeks. If you can't secure the funds within four weeks, you may run the risk of the property being returned to the market.

However, by speaking to a bridging loan company this need not be the case.

This kind of specialist finance product is targeted towards those who need money at short notice and just a few days after you apply – on the condition that you have been approved for credit of course – the money could be in your account within a couple of days.

From here, you should find you have the resources you need for the transaction to go ahead and you could be making use of your new property before you know it. During this time you should also look to apply for a mortgage and once you eventually receive this kind of credit, you can use the money to pay back your bridging loan.

But if you are hoping to obtain bridging finance in order to fund the acquisition of a property you have bid for at an auction, there are several things you will need to bear in mind when filling out your application.

You will need to make a note of the open-market value of the property, even if this is substantially different to the amount that you paid for it, as well as if it is a residential, commercial or mixed-use development.

In addition, you will have to make it clear whether it is a freehold, feudal or leasehold property, as well as – of course – how much money you want to borrow.

Should you have any questions about how to raise money in order to buy properties available at auctions, it is a good idea to find out all about bridging loans. In doing so, you will be able to speak to a qualified expert who can go through all the options available to you and help you to figure out what kind of product would be most suitable for your needs.



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