What’s the best way to fund an auction purchase? Do I need bridging or will any lenders give an undertaking to release funds WITHOUT knowing the final purchase price? And who can beat the 30 day completion date deadline?
You have a small number of finance options when buying property at auction:
Given the tight completion deadline of an auction purchase, do you really trust a mortgage lender to underwrite, survey, issue an offer in sufficient time for your solicitor to do the legal work to complete in time? You would be a brave man if you do.
Assuming that, as you’re asking the question, we can rule out your own cash as an option, let’s look at the other options:
You can use private money, but what will that cost and how reliable will they be? I am dealing with an auction purchase right now that went down that route; two weeks after the purchase/exchange at auction and with only two weeks to complete, their investor pulled out. So bridging had to be put in place hastily to complete in time, which we will do in 14 days not 30 because that is how fast bridgers can work.
You can get a mortgage in principle, but even a BTL mortgage lender will find the usual 28 day completion date almost impossible to meet. They simply aren’t geared to this kind of time frame.
If you buy at auction you will find, almost without exception, there are bridgers who will lend and there are plenty to choose from. Typically, they will lend 70% of the purchase price, less their costs. They will know the purchase price because as soon as you have bought it the purchase price is known.
You can line up this finance prior to auction too and they will just lend a given percentage of the purchase price.