Bridging the gap when buying property at auction
With news from Auction Finance revealing a significant uplift in the number of people buying property at auctions, Head of Property Lynne McCaffrey is here to explain how this can differ from the normal buying process and why buyers may need to take out a bridging loan in the first instance:
“Auction Finance’s figures are pretty impressive – a 78 per cent increase in sales, a record breaking 3000 lots sold and a total amount raised through residential property sales surpassing the £3bn barrier for the first time in seven years. It all suggests one thing, auction property sales are on the up.
“The thing with properties bought at auction they often have a much faster turnaround time than a standard purchase through an estate agent. In fact, according to Auction Finance, about three quarters of all properties bought at auction completed and exchanged within four weeks. In normal circumstances mainstream lenders might not have even issued the mortgage offer by then.
“That’s why people buying property at auction often take out a bridging loan, or short term loan as it is often referred to as, for the initial purchase before switching to a standard mortgage at a later date once the deal is done.
“Bridging loans are great for situations such as this but it’s important for anyone taking out a short term loan to understand that they are not suitable as a replacement for long term finance; you need to be able to repay it by the due date or there will likely be significant financial implications.
“Bridging loans are a highly specialised area and need a solicitor who is highly familiar and experienced in this arena. Our expertise has been recognised within the industry when we were named the ‘Highly Commended Legal Partner’ at the Bridging and Commercial Awards.
“For the right client, in the right circumstances, bridging can be a valuable funding tool. They are particularly useful for landlords and property investors looking to purchase run down properties to refurbish and sell on or convert into rental properties and HMOs.”
Content correct at time of publication