Properties bought at auction generally require a 5% deposit on the day while signing a legally binding contract to pay the remaining 95% within a 28-day period. This is where the bridging loan for auction comes in. Bridging loans are a preferred option as they help to bridge a gap until a long-term mortgage or sale can be secured. Bridging finance for auction is available for land, commercial and semi commercial buildings, residential and buy to let properties.
Many purchasers do not have the amount of cash available to buy a property outright. This brings Bridging Finance into the buying journey. Bridging Finance can either be arranged “in principle” prior to the auction or shortly after your bid has been successful. This would be well within the time frame required for completion and normally much quicker than mortgage finance which is due to the requirements of checking credit and affordability etc which generally always takes longer to arrange.
Bridging finance can also be used when a property is deemed to be not suitable for a mortgage. This is normally when a property is without a kitchen, bathroom or both or has other defects where a bridging loan company will accept a client but a mortgage company will not.
Bridging Finance can be arranged on a new build property which has yet to be finished or on a renovation type project which for whatever reason has not come to fruition. Neither of these examples are generally allowable for mortgage finance but because bridging is simply based on the value of the security asset, provided the valuation is acceptable, then the bridging loan lender will usually lend up to their maximum LTV (Loan to Valuation) i.e. size of the loan compared with the value of the security and will do this quickly and without the fuss of a mortgage.
Land or commercial units are much easier and quickly financed by using a bridging loan rather than by any other finance type.
The bridging finance arranged at auction is a short-term solution and once the requirement for the bridging finance is resolved, then the bridging loan is either repaid by selling the property, by refinancing the property or paying off the bridging loan with available cash.
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