How To Use A Bridging Loan To Buy A Property At An Auction

The last bid stays resonating into the air just as the hammer strikes the rostrum till the auctioneer announces the winner. 

That all happens in the movies. We think the bidder who wins the bid is a spoilt brat wasting his parents’ money by purchasing properties across the country. 

However, in reality, it’s more than meets the eye. Property investing is a profitable business, especially in the UK. 

This article will unveil some important aspects of buying a property at auctions. We will also bust some of the myths around the subject matter. 

Let’s dive deep into the text and divulge some nuggets of information that may help you in the long run. 

Auction finance– a myth busted:

We have often seen a protagonist calling shots in the auction room. Among hundreds of wealthy people of the town, he bids the highest. 

On the strike of the hammer, he outbids all others. But, while it may seem alluring to see the protagonist win the bid, something smells mysterious and dark. 

The auctions seem like a no-go area for ordinary people as it gives the feel of an extravagant pursuit.

We feel the bidders are a different species with loads of money in their banks. However, that may or may not be the real case.

Anyone pursuing to become a property investor can bid in the auctions and win them. However, one thing is clear it’s not a way to spill your money for nothing. 

Rather, it’s a tool a thrifty tool to earn money from property development. Thus, you shouldn’t think of it as a walk in the park because it requires reasonable effort to earn returns on investment from the property. 

You first need huge sums of money before participating in an auction. However, that doesn’t mean you must be a millionaire to win an auction. 

You can arrange money in terms of loans. Banks or high-street lenders don’t provide loans for auctioned properties. 

There are a few reasons you need to know:

First, these assets are usually run down and derelict. They remain empty for a long time and don’t have a bathroom or a kitchen. 

Second, they can’t process the finance in a short time. For example, a typical auction purchase requires 28 days maximum. 

No high street lender provides you with the loans in such a short time. Therefore, you need to find some other way. In the UK, bridging finance is the best way to get a loan processed in days. 

Therefore, if you are willing to bid on a house you want to purchase at auction, you need to get quick bridging finance. 

Types of auction finance:

There are several types of auction finance in the UK. Typically, all these bridging finances are provided for uninhabitable property. 

Depending on the nature of the asset, you can get the following types of finance.

  1. Residential property such as flats, apartments, country houses, and bungalows.
  2. Commercial property.
  3. Buy-to-let property.
  4. Farmlands.

What are bridging loans for auctions?

A bridging loan is a short-term financial product that serves the purpose of a bridge to reach a different financial position through loans. 

In this case, fast bridging finance provides you with the money for a property at auction when you don’t have the required cash. Later, you can refinance the property or sell it to return the loan money. 

The most important thing that you need to know is the interest rate. It depends on the total value of your collateral and the lender you chose for a loan.

You can either go for P2P lending platforms or find a broker to get these loans. Wherever you choose depends on your borrowing needs. 

How to win an auction with bridging loans?

Purchasing a property at an auction is no less than art. So, by all means, you need to go through different steps to get bridging finance for auctions. 

Auctions are the best choice if you want to scale your property investment business. 

First, find the upcoming auctions. Then, you can find a whole listing of events in the market. 

In the UK, you can see auctions being held now and then. Different websites can inform you about the next bidding.

 Subscribe to those websites to get all the recent updates into your email inbox. 

Once you have chosen a property auction, outline your business purpose. Every investor has different purposes. 

Some want to get the property to refurbish it and then sell it. On the other hand, you may want to purchase for but-to-let. 

After finding your purpose, you can personally evaluate the property. Bring a valuation expert with you and inspect the auctioned property. It will let you decide whether you should bid on this property or not. Moreover, you get the maximum bidding idea.

After knowing your maximum bid and the value of the assets, you can apply for a bridging loan UK.

 Depending on your loan and the amount you want to invest in, you can attend the event and play safe instead of throwing the arrows in the air. 

Keep one thing in mind: the property with a low guide price often gets the most eyes. With more investors eyeing the such property, its bidding value soars. 

You need to take each step judiciously to become a successful bidder. Therefore, if you get swayed away by the bidding game, you may cross the loan threshold and will overpay the loan.

Final words:

Auctions play a vital role in property investment because they provide a chance to get an undervalued property.

You can later refurbish it to improve its market price. Thus, selling it can earn you a high return on investments.

Quick bridging finance can be a lifeline for this venture. The reason is that it helps you finance your auctions in a short time. 

Due to its instant availability, you can proceed with the auction payment and later plan your exit strategy by selling that property.

This article will inform you of key insights related to auctions and bridging loans.