Use bridging loans to purchase properties at auction

Tuesday, 08 November 2011 05:21

Use a bridging loan to buy homes at an auction

Attending an auction can prove a fantastic way for you to purchase properties for significantly less than market value. However, if you have successfully bid on a development, it is vital that you consider how you will actually buy it and this is where bridging finance can come in handy.

Over recent years there has been a steady rise in the number of buildings being sold at auction – in part due to the ongoing effects of the financial crisis – and this has created opportunities for people to get fantastic deals that simply would be unavailable when purchasing normally. It is partially for this reason that auctions have become particularly popular among individuals keen to advance up the housing ladder, as well as landlords wanting to expand their portfolio of rented homes.

Whatever reason you may have for wanting to attend a property auction, it is worth bearing in mind that once the winning bid has been placed, you will have a relatively short amount of time to gather the money required to complete the transaction.

Normally, you will need to pay within 28 days of the auction ending – otherwise you run the risk of missing out on the property altogether – and while you're likely to already have some money saved up as a deposit, there is a chance you may need to borrow more. However, as the deadline to raise the necessary funds is pressing, it is worth your while to think about applying for a bridging loan.

As these products are specifically designed to provide consumers with finance at short notice, you'll be able to quickly get the cash needed to close the deal.

Once your application has been submitted, a lender will get back to you within 24 hours to let you know if you have been approved and – provided that you are successful – the cash could be deposited in your account that same week.

Borrowing against the value of a property in this manner means that you will be in a position to obtain several thousand pounds in the space of a few days, so you could not only pay for the development you have bid for quickly but also meet expenses like decorating, legal bills and estate agent fees.

With this in mind, it is perhaps unsurprising that many property investors look to use bridging loans as a way of buying homes at auction. By turning to such finance deals, buy-to-let professionals can quickly purchase a property and pay for it to be refurbished before renting it out. The money that is received from tenants could then be used to pay back the bridging finance deal.

However, such loans are also a great way for businesses to finance expanding their real estate portfolio, whether it is to buy retail outlets, office blocks or industrial units.

No matter what reason you may have for wishing to attend an auction and whether you're bidding as an individual or on the behalf of a company, it is a good idea to seek advice about how you will finance buying any homes that you have bid for.

By getting independent guidance from an expert, you will be able to put forward any bridging loan questions that you have prior to going to a property sale and establish what your next step ought to be.

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