By Peter Laurie

28th April 2022

Auction finance for BTL properties
Buying buy to let property at auction? Bridging loans are designed for this purpose. A property does not need to be fit for living in, and access to cash is faster than a buy to let mortgage. Find out more

Purchasing a buy to let property at auction is an option taken by many landlords, however it can be a daunting prospect. In many cases you’ll need to set up a bridging loan to complete the purchase in the required timeframe. Read on to explore the benefits of purchasing your buy to let property in this manner.

Why purchase buy to let property at auction?

Properties are generally sold at auction for four main reasons:

  • The property requires renovation or development work

  • The property isn’t selling on the market

  • The owner needs a quick sale

  • The property has been repossessed

Due to the likelihood of the property needing renovation or work carrying out on it you may be able to purchase property at auction for less than its market price.

How do property auctions work?

Auction houses tend to publish both physical catalogues of properties available at auction and add those properties to their website before the auction giving you a chance to look at the available lots. The properties will tend to have a guide price, which is an estimate on what the property may achieve at auction.

Some sellers may set a reserve price for their property, this means that their property won’t be sold for a price under what they’ve stipulated.

Once you’ve successfully purchased a property the auction house will tend to need you to pay a 10% deposit on the day and the other 90% within the next 4-6 weeks.

How does auction finance work?

Because of the need to pay for the property in full just 4-6 weeks from the auction taking place it’s often not practical to set up a mortgage in that time. Bridging finance gives you the funds that you need to complete the purchase and gives you the time to set up a buy to let mortgage.

Bridging loan lenders will want to know your exit strategy when you apply, this tends to be either the sale of the property or a re-mortgage to a longer term finance solution. It’s best to decide your strategy before applying.

Most lenders, including Mercantile Trust will be able to offer you rates of up to 75% LTV meaning that you’ll need to cover the other 25% as a deposit. Your auction finance term can range from three months to a year and you are able to repay the loan early if you wish.

If you’re interested in purchasing a property at auction and will be requiring auction finance, why not discuss your needs with a specialist lender like Mercantile Trust today. We aim to help everyone, by reviewing your application in person, rather than on a computer. We offer great rates, a fast turnaround and exceptional service!

Get started now by heading to the auction finance page and filling out the quick and easy apply form!