With more of us working or furloughed from home and perhaps watching more daytime television than in the past. It is no surprise that there has been a surge in the number of people buying property at auction. Programmers such as Homes Under the Hammer, which follow a purchaser buying a rundown property. At auction and transforming it before renting it out or selling it on, have grown in popularity during lockdown.

Savills, one of the big property auction houses, has sold more than £240m of property at auction so far this year. Some 40 per cent more than the same period last year. Auctions may have had to move online, thanks to Covid. But this has made them less intimidating and more accessible to bidders than raising an arm in an auction room.

With savings accounts producing poor returns, and the stock market proving too volatile for many. Bricks and mortar remains an attractive investment. But if you are tempted to buy property at auction. You must make sure you have the right finance in place before taking the plunge.

Bridging Loan

Deadlines are extremely tight – if yours is the winning bid, you are committed to the purchase. Contracts are exchanged on the day of the auction and you must pay 10 per cent of the purchase price. The balance is due within 28 days, which is not long to arrange the necessary finance but one of the attractions of auction is that the sale is binding and completed within a short period of time. Another advantage is that you can benefit from the stamp duty holiday, saving up to £15,000 off the purchase price. Whereas if you bought in the ‘normal’ way, there is no guarantee you would complete in time.

If you are not a cash buyer, you will most likely need a bridging loan. Funds are released quickly – usually far faster than a standard residential or buy-to-let mortgage – enabling you to fund all or part of the required works. Bridging finance is a short-term option (pricing is on a monthly basis with loans usually running for up to a maximum of two years). Once the works are complete, you can refinance onto a mainstream residential mortgage (if you plan to live there) or a buy-to-let if you are renting it out, or sell the property and repay the loan.

Bridging loans are available to individuals, sole traders or via limited companies on a residential or commercial basis.

How AWS can help

AWS has plenty of experience in arranging bridging finance and has good relationships with specialist bridging lenders, so we can help you in obtaining the right funding for your circumstances. Please get in touch for more information.