Auction Loans

USING BRIDGING FINANCE

Lenders will agree to a mortgage in principle prior to auction but it still relies on the paperwork being completed before the 28-day deadline.

Bridging loans generally take 1-2 weeks to process from the application being made, ensuring that finance is available quickly. This means funds would be available to make the 28-day deadline on an auction purchase.

Advantages of bridging loans used for auction

The main advantage of a bridging loan is the quick application process, which ensures the funding necessary to buy a property at auction is available within the required timeframe. However, there are several other advantages, which include the following:

• A bridging loan is based on the borrower’s ability to pay the loan back within the agreed timescale, rather than solely based on income or credit history, although these factors may also be considered during the application
• It’s possible to pre-arrange a bridging loan prior to the auction. If the bidder is successful and purchases the desired property, the bridging loan can then be fully approved.
• Bridging loans can be awarded for properties that a high street lender would never consider, including uninhabitable properties. The loan gives the purchaser time to carry out the renovations and either secure long-term funding when habitable or re-sell.
• Borrowing at 75% LTV is common, although if another property is used as additional security it may be possible to get further borrowings.
• Bridging loans for purchases at auction can also be used for land or commercial property purchases, as well as domestic properties.
• If you obtain a Bridging Loan with Novellus there are no early repayment fees.
• Aspects to consider before applying for a bridging loan to fund an Auction purchase.

There are a few things to consider carefully before making the decision to take out a bridging loan for an auction purchase:

• The borrower must have a high-value asset to act as security against the loan. This can be the property being purchased or existing property. If the borrower defaults on the loan, this asset can be called in to pay off the loan.
• There must be an exit strategy in place to pay off the loan. Examples include selling the property or securing long-term funding.
• Novellus offer bridging and development finance, including bridging loans for auction. This is aimed at investors looking to buy commercial property, land (with or without planning) and refurbishment projects. Rates start at 0.75% per calendar month. Novellus do not offer fixed products and each case is underwritten on its individual merits.

The quick turnaround required for auction purchases means it can be challenging to secure funding to purchase an auction property within the timescales. The auction loan from Novellus fills this gap with its quick completion time for loans, from application to approval. A swift decision is guaranteed on all applications, ensuring the funds are in the bank immediately after the approval and legal process has completed.

Borrowers deal directly with a principal which ensures the application process is a swift one. Anyone in need of fast finance can apply as every application is considered individually.