Due to the short timescale for the purchase and completion of an auction property, long term financing such as mortgages can be difficult to put into place quick enough to meet deadlines. However, there are other options of funding your purchase, including specialist auction finance.
Auction House work in partnership with national specialist lender, Together. To delve into the world of auction finance and offer an insight into how it works, we spoke to Auction Specialist at the company, Amy Schofield.
Amy has worked at Together for 4 years but has worked in finance for over 10. She’s a regular face at our in-room auctions in Scotland and is always on hand to provide information and advice to potential buyers about how auction finance could work for them.
1) Firstly, what is auction finance?
Auction finance is a type of bridging loan facility which allows buyers to purchase residential, commercial and land at a property auction. It's a form of short-term finance over 12 months that can be arranged very quickly, making it an effective way to fund auction purchases where you are given a short timeframe to complete.
It’s short-term finance over 12 months and there is no minimum term on the loan. Together are known for completing within short timescales - we have the capacity to complete within 24 hours if necessary.
2) How does auction finance work?
*The following explanation is for a standard auction purchase that isn’t urgent and is based on the property being a residential standard construction property.*
When a customer has found a property they wish to bid on, the first thing they would do is complete a decision in principle through our website: togethermoney.com/amydip
Once they have a pre-approval they can go and bid. The pre-approval will do a soft credit check and an affordability assessment, this will give us a great indication that we can lend.
When the customer is successful, I will request some further documents and submit the file to underwriting, who will then instruct the customer’s solicitors within 24 hours.
After this, it is down to the customer’s solicitors to prepare the file and report back to Together. We need the report on title from the solicitors at least 72 hours before completion so we can review and complete on time.
Once you've bought at auction, you'll have up to 12 months to repay your auction finance to us. You can do this by selling the property on, or by refinancing with longer-term borrowing.
3) How would a potential buyer know if auction finance is right for them?
Auction finance is right for anyone who doesn’t have 100% of the funds to buy at auction. It could also work for customers who have cash but maybe want to buy more than one property to increase their profits.
4) It’s a common myth that auctions are only for property investors and cash buyers. How can auction finance help different types of buyers purchase property under the hammer?
We recognise that lots of people are interested in buying at auction these days, not just investors. We lend to all sorts of customers on all sorts of properties, and we’re an open-minded lender when it comes to credit profiles.
Our common-sense approach to property auction finance means we can often lend when others struggle to. Including if you’re self-employed, are making your first investment purchase, or have less-than-perfect credit. We’re also flexible in lending to people with no income, such as students.
5) Why should potential buyers choose Together as an auction finance lender?
Together have a loan book of over £5 billion and have been supporting auction buyers for more than 50 years. Even if it’s ex-council, high-rise, or you’ve been told it's 'unmortgageable', we may be able to offer an auction finance solution to help.
We attend dozens of property auctions every year. In fact, there's a good chance you'll see us on the floor on auction day.
We’ve been working in partnership with Auction House for several years now and have built up an in-depth knowledge of their business, auctions and their customers that enables us to deliver a tailored yet fast lending service. We have great relationships with each of the regional branches, including Auction House Scotland, and work in conjunction with the teams to offer the utmost professional and informed advice and support to their customers.
For more information about auction finance and Together’s services, please get in touch with Amy on 0161 933 7155 or email amy.schofield@togethermoney.com
You can also visit togethermoney.com/auction-finance
