Use bridging loans to purchase properties at auction

Tuesday, 08 November 2011 05:21

Use a bridging loan to buy homes at an auction

Use a bridging loan to buy homes at an auction

Attending an auction can prove a fantastic way for you to purchase properties for significantly less than market value. However, if you have successfully bid on a development, it is vital that you consider how you will actually buy it and this is where bridging finance can come in handy.

Over recent years there has been a steady rise in the number of buildings being sold at auction – in part due to the ongoing effects of the financial crisis – and this has created opportunities for people to get fantastic deals that simply would be unavailable when purchasing normally. It is partially for this reason that auctions have become particularly popular among individuals keen to advance up the housing ladder, as well as landlords wanting to expand their portfolio of rented homes.

Whatever reason you may have for wanting to attend a property auction, it is worth bearing in mind that once the winning bid has been placed, you will have a relatively short amount of time to gather the money required to complete the transaction.

Normally, you will need to pay within 28 days of the auction ending – otherwise you run the risk of missing out on the property altogether – and while you're likely to already have some money saved up as a deposit, there is a chance you may need to borrow more. However, as the deadline to raise the necessary funds is pressing, it is worth your while to think about applying for a bridging loan.

As these products are specifically designed to provide consumers with finance at short notice, you'll be able to quickly get the cash needed to close the deal.

Once your application has been submitted, a lender will get back to you within 24 hours to let you know if you have been approved and – provided that you are successful – the cash could be deposited in your account that same week.

Borrowing against the value of a property in this manner means that you will be in a position to obtain several thousand pounds in the space of a few days, so you could not only pay for the development you have bid for quickly but also meet expenses like decorating, legal bills and estate agent fees.

With this in mind, it is perhaps unsurprising that many property investors look to use bridging loans as a way of buying homes at auction. By turning to such finance deals, buy-to-let professionals can quickly purchase a property and pay for it to be refurbished before renting it out. The money that is received from tenants could then be used to pay back the bridging finance deal.

However, such loans are also a great way for businesses to finance expanding their real estate portfolio, whether it is to buy retail outlets, office blocks or industrial units.

No matter what reason you may have for wishing to attend an auction and whether you're bidding as an individual or on the behalf of a company, it is a good idea to seek advice about how you will finance buying any homes that you have bid for.

By getting independent guidance from an expert, you will be able to put forward any bridging loan questions that you have prior to going to a property sale and establish what your next step ought to be.



blog comments powered by Disqus

Finance articles

  • Is a bridging loan right for budding entrepreneurs?

    Raising the money you need to start a business can be hard, however, there are alternatives to bank loans. Among them are bridging loans, peer-to-peer lending and borrowing money from friends and family, meaning you need to do plenty of research.

  • Important questions to ask bridging loan companies

    Before taking out a bridging loan, you must understand a number of key points. These include the rate of interest you will be charged, the length of time you have to repay the loan and whether there are any arrangement fees that apply.

  • Why bridging loans are only suitable for short-term funding

    You should only consider bridging finance if your funding needs are temporary. This is because the high rates of interest make bridging finance unsuitable as a long-term solution, so if you have long-term needs, you should look at other options.

  • Banks vs. specialist lenders – which bridging loans are best?

    Both banks and specialist bridging loan companies can provide the bridging finance you need, meaning you need to compare products from a range of providers. You need to look at factors such as interest rates and arrangement fees.

  • Can bridging loans work for those who only need small amounts?

    Some bridging loan companies will lend up to £5 million if you have sufficient equity in your home, however, what if your borrowing needs are more modest? If you need a sum of £10,000, bridging loans can still be an option.

View More Articles

Related stories

Ten expert pension tips on how to plan for your retirement

The key to a comfortable retirement is financial planning

The New Year is a good time to review your pension provisions. Pensions experts McCarthy & Stone run through ten expert tips to help you take control of your future.

The cheapest ways to pay off Christmas debt

Make sure the only way is up for your finances in 2013

If you are dreading your next credit card bill after living it up over Christmas then take control of your finances and find the cheapest method to pay off your debts.

A parents guide to student finance

It is possible to lessen the debt a student has on graduation

Students face a daunting financial legacy at the end of their studies. Find out how you can help as a parent.

The top ten credit cards if you have a bad credit history

The top credit cards if you have a bad credit score

Our latest feature shows you how to improve your credit history through using a bad credit credit card and we select the top ten cards for you to apply for.

Retirement income: Pensions, investments or a third way?

Greg Secker, former currency trader and founder of Knowledge To Action

Greg Secker, founder of forex training company, Knowledge To Action, says that with diminishing annuity returns and barriers to entry to some investment routes, FX trading could be a way of increasing income in retirement.

How will personal finance trends affect your finances in 2013?

What does 2012 hold in store for your finances? presents the second part of our in-depth analysis of how your finances will be affected in 2013 focusing on the likely trends in personal finance in 2013.

Autumn Statement preview: Will George Osborne go for growth?

George Osborne delivers his Autumn Statement on December 5th

The Chancellor has to juggle the numbers in his Autumn Statement to keep the deficit down whilst stimulating economic growth with infrastructure investment. How will he do it?

Remember, remember to check home insurance before bonfire night

Bonfire Night sees a spike in home insurance claims

Bonfire night on November 5th sees a spike in home insurance claims so secure your home, make sure your car is safe and take precautions if you are holding a fireworks party.

Newsletter sign up


In addition to the weekly newsletter, which areas of finance would you like to hear from us about:

Tick this box if you would like us to send you promotions from carefully selected third parties.

By signing-up you agree to the terms of use and privacy policy.

sign-up button

Get the latest information on: