take the nightmare out of buying a property at auction for your client
Buy-to-let investors are certainly benefiting from strong house prices and record-high rents and according to experts, are flocking to auction rooms as a result.
Many auctioneers are reported to be experiencing increased demand for property purchases at auction as more buy-to-let landlords seek to pick up bargains.
Last month, national auction analyst EIG published a half-year auction market review which revealed the total raised by UK property auctions in H1 of 2014 hit £2 billion, a 21% increase on 2013 and the second highest ever H1 total recorded by EIG.
You may have a client wanting to take advantage of opportunities at auctions but time can often be tight when it comes to raising funds for a property purchased at auction and with banks now taking longer to process loan applications, it is virtually impossible to secure a mortgage in the time-frame required.
It’s no wonder we’ve seen an increase in investors and developers turning to bridging finance to assist with their auction purchases.
One of the benefits of a bridging loan is simply the speed of transaction. Where a mainstream bank may take several months to put together a loan for a borrower, a bridging finance company is often able to make lending decisions within hours of initial enquiry so funds could be released in less than a day.
For example, we recently completed a case for a client who needed £215,000 to complete an auction purchase, plus renovations. His mortgage lender couldn’t provide the finance for completion in time and so he faced losing his deposit.
We provided a £215,000 bridging loan, at 65% LTV over a 6 month term at 0.99% per month with no exit fee or early redemption penalty. We managed to provide the loan within 24 hours, saving the client’s deposit.
By taking out a bridging loan the client also had time to complete the renovations to maximise his returns as after 6 months he sold the property, enabling him to repay the bridging loan and enjoy a substantial profit.