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The results provided by this calculator are estimates only. Actual loan terms, amounts, and rates may vary based on your specific circumstances and lender requirements. We recommend consulting with a financial advisor or lender for a detailed, personalized quote.
If you’re looking to purchase a property at auction – perhaps to refurbish, or to acquire the land to build upon – then you may need finance to complete the transaction.
Our auction finance calculator can help you understand how much you might be able to borrow and how much it might cost when seeking finance for your auction property.
There’s been a boom in the industry across recent years thanks to a resurgence in landlords and investors and government incentives to get back into development and refurbishment. Profits and yields have increased whilst demand shows no signs of slowing down either. Supply simply cannot keep up with demand in this respect, and it’s leading to a surge in interest.
With property auctions increasing in popularity across the UK many developers and property renovators are increasingly looking for flexible and specialist finance in order to fund their projects.
Auction finance is similar to other types of bridging loans, but can vary depending on circumstances, so it’s worth getting a good idea of the costs first. This will also allow you to get a better idea of what type of mortgage you qualify for in the long run.
Firstly, for our quick calculator you’ll need to input which type of property you intend to purchase at auction whether that’s, for example, a residential property or a commercial property.
Secondly enter the anticipated purchase price of the property. This doesn’t have to be 100% accurate. Finally, just enter the number of months you think you’ll need the finance for.
For our manual calculator you’ll need to enter the same details again but also enter the Loan To Value (LTV), Rate in %, Lender fee in % and the Exit fee in % and this will give you an accurate read-out of what your finance will cost if you already know the terms you’re seeking.
The rates for your auction finance will vary depending on your circumstances but, by and large, you can expect to pay between 0.45% and 0.75% per month with a lender fee of 1% – 2% of the value of the loan.
Auctions can be tricky to navigate when you know that you’ll need your initial loan to begin with before arranging an auction, so it makes sense to know the rates you may pay.
Again, auction finance, bridging loans and arranging a mortgage will depend on circumstances so it’s also worth speaking to an experienced member of the team who can give you more details.
When purchasing property at auction you’ll need to pay an amount up front, typically 10%, to secure the property with the remaining balance required within 28 days.
Finance can often help with this and, especially, a bridging loan helps many investors to cover the initial outlay in a specialist short-term loan before looking at a mortgage later down the line, and the value you may qualify for.
Once you contact an intermediary, they’re then able to get more details about the finance you need and, in most cases, if you meet the criteria, this can be arranged for you quickly. You can let them know how long you think you’ll need the finance for, and an agreement is then signed for the funding. Using a finance calculator can help you get an idea of what to expect.
Ultimately, when you’re looking to finance your auction property through a loan, you’ll want to find the best rates over the shortest term until you can agree a mortgage or alternative finance.
There are a handful of companies and finance investors who specialist in this type of loan but more often than not it’s laborious and time consuming to approach them individually and so many turn to intermediaries to search the market for the best rates and a good loan on their behalf.
Our advice is to speak to a specialist team member who can understand your project in detail first and foremost before submitting your application to a panel of lenders that can then provide you with a quote and time scale for your funding, allowing you to make the best decision. Once that funding has been acquired and you know your budget, you’re then able to attend auctions much better equipped.
Buying at auctions can be a tricky business but for those investors who are experienced and know what they’re doing there’s some seriously good business to be done at auction.
Due to the quick and unpredictable nature of auction, however, specialist finance is often required for investors. Auction finance and bridging loans can be the answer and these types of application can be made quickly, often being approved within 24 hours with funding released within days.
It also means you can bid with confidence knowing that you have a bridging loan in place already before securing a mortgage afterwards. It allows you to attend auctions much more confidently.
Auction finance can also be used for different types of property whether it’s residential, commercial or land. With it being a short term loan, too, it means very reasonable rates and arrangement fees.
Whether you should use a loan to fund your property purchase at auction will depend on your situation. Often, however, investors tend to take these types of bridging loans in order to ensure that they have the funds available to them to bid confidently.
After they’ve secured the property and paid the deposit or full amount, they’ll then go on to arrange a mortgage whether that’s residential or a Buy-To-Let mortgage, for example.
If you don’t have access to the funds available and want to purchase a great deal at auction, then this type of bridging finance can be very attractive.
As mentioned earlier a loan is often required when considering auction finance because the property needs to be completed and paid for within 28 days or this could result in the loss of the purchase.
Auctions move quickly and this often requires a loan to move at pace to secure your investment and, subsequently, your mortgage too once the sale has been completed.
Due to the fast paced nature of getting a bridging loan or a property loan once you’ve purchased one many lenders are keen to get your application processed quickly.
This often means that you can get a bridging loan approved within days or even hours depending on your background.
Ultimately, approval for your loan application will be dependent on your circumstances, but luckily, we have a hugely experienced team of brokers that know exactly what our lending panel require and what they’re looking for.
Through our long established relationships in the loan industry, we’re also able to secure exclusive rates and deals for our clients. If you’re experienced in buying property then you’ll know that these types of specialist loan can vary from lender to lender and, as such, we’re able to navigate this for you by finding exactly the right deal for you.
Through our experience we’re also able to ensure that your application is in the best shape it can be to be approved, as we know exactly what our panel require.
This also means we can get you approval as quickly as possible before you’re ready to go and bid along with other types of investor.
Our calculator that’s located above also means that you can get a really good idea of what the costs and implications are for you and if you’d like to use our manual calculator you can play around with more specific variable such as interest rate.
You may have heard about bridging loans in the context of property investment or moving house, but what exactly are they? Basically, bridging finance is a type of short-term loan that allows a buyer to purchase a property before their existing home or investment property is sold. As the name suggests, it ‘bridges’ the funding gap in the lag between purchase and sale – offering rapid access to the necessary purchase funds for a brief period of time.
Borrowers can access from £5,000 to £250 million, depending on applicant status, the value of the property and other lender criteria. Higher lending amounts are typically reserved for borrowers who can put up several properties as security. Quotes are provided on a Loan to Value (LTV) of 65%-80% in most situations.
The bridging finance market has grown rapidly, with a number of small and focused lenders now on the market, catering for specialist property finance needs. The market has changed because large high-street lenders have become less willing (and sometimes less able) to lend ever since the financial crisis of 2008.
As to whether a bridging loan for property development, auction purchase or private home buying is a good idea, it depends on a variety of factors. Bridging loan requirements vary by lender, but each will have certain common features that need to be considered.
The most notable feature of this type of finance is that the interest rate is likely to be high. At the same time, there are typically high administration fees applied to the loan. Because of this, it is essential to proceed very carefully and with a full view of the facts. Borrowers have been burned by this type of loan in the past, in instances where transactions have fallen through, or where lenders have turned out to be unscrupulous and untrustworthy.
Benefits of instant bridging loans
1. Rapid access to money
2. Ability to borrow large sums – often up to £250 million depending on applicant status
3. Options for flexible borrowing.
Possible downsides of bridging loans:
1. Failure to understand the unique features of these loans can result in financial risk
2. Bridging finance is secured against your property; meaning it can be sold if you can’t meet the repayment terms
3. A costly option with fees and higher interest
Bridging finance interest rates will vary by lender. However, interest costs of 1.5% a month are not unusual, which can equate to an annual percentage rate of 18%.
Bridging loans may have fixed or variable interest rate features. Fixed interest rates are ideal for customers who want stability, as they offer the same amount of interest for the duration of the term. The rate is pre-agreed, but there may be a premium for this security.
The other choice is to have a variable rate bridging loan which can change with the base rate. However, you can save money if the base rate decreases. Borrowers who are less concerned about security sometimes prefer the variable rate option if they believe that the financial markets will travel in their favour. Knowledge and market insight is required here, along with a thorough understanding of personal risk tolerance. If interest rates appear to be rising, most customers will choose the fixed interest rate to lock it in and avoid further increases in the event of a base rate rise.
Bridging loan periods tend to be for several months and there are usually different options for paying the interest portion.
Monthly repayments
The customer repays the interest every month as a separate payment, rather than adding it to the outstanding balance
Rolled-up bridging finance deals
The compound interest is calculated monthly but added to the outstanding loan balance and paid together when repayment is due.
Retained interest
The monthly interest payment due is covered up to a predefined date so that the full sum is only repaid when monies are due.
As well as interest payments, there will be an arrangement fee for the set-up of the bridging loan, which is usually around 1-2%. A repayment fee for exit paperwork may also apply, along with valuation fees for the cost of the surveyor.
Remember, this type of finance is designed to be short-term. As soon as it extends beyond the agreed interim or bridging period, penalties can rapidly stack up. Typically, bridging finance is available for 1 – 18 months.
Yes, there are two broad types: closed bridging finance and open bridging finance.
With closed bridging finance you will tell the lender how you will repay the loan – with what funds and when. These loans usually complete within a few months and the clear exit plan is required as a lending condition.
Open bridge finance won’t usually need this type of exit plan, and it is typically the loan of choice when funds are needed urgently to complete a property transaction. No detailed plan is needed to explain how the debt will be settled, and the finance tends to be offered for up to a year. Of course, it’s important to note that interest will keep being applied throughout this period.
There are also first charge bridging loans and second charge bridging loans.
If you have a loan against a property which is already mortgaged, you’d take out a second charge loan. An example of this would be if you were planning to finance a property extension to improve the property. The categorisation tells the lenders who will have legal priority for repayment if the loan was unable to be paid off at the term-end.
First charge loans apply if the new loan is the first secured on the property.
Bridging loan requirements will depend on the lender. Often, lenders will require that:
Customers must also take out their property mortgage with them too, providing the bridge finance as an interim measure before the standard mortgage comes into play.
Property is put forward as security against the loan. Some lenders expect applicants to have more than one property in order to be eligible for their bridging finance products, but this will depend on the lender and the size of the loan.
Applicants show proof of income – although, interestingly, as loan interest isn’t repaid monthly, some lenders do not request this.
The applicant shows evidence of their property investment track record if they are planning to develop their purchased property.
The applicant can show a business plan if they are using the bridging loan for commercial purposes.
Development loans are another type of short-term property development loan. They are repaid in stages and calculated on the gross value of the development. Personal loans are another option, as are remortgages when timescales are more flexible and a long-term loan is desirable.
Use a bridge loan calculator
Ask for your lender to provide a tailored bridge finance example or illustration around your particular borrowing needs.
Think carefully about the type of bridging loan that you need – whether open bridge finance or closed bridge finance.
Know whether the loan is a first or second charge type.
Clarify whether the interest rate is fixed or variable.
Review products from several lenders.
Be clear on your security.
Read the small print!
Bridging loans are offered by banks, building societies, specialist lenders and brokers. They aren’t widely advertised and usually require a direct application by the customer to find out the product features and offers.
Once you have made an application, a decision will usually be made within 24 hours. The funds then will take around two weeks to be issued, including time for checks to be carried out, the valuation and the actual transfer.
Hank Zarihs are highly experienced and specialist financial intermediaries operating in the property development market. We work with a tried and tested panel of over 60 trusted lenders and can provide excellent bridging finance with attractive features. Contact us to find out more.
Hank Zarihs Associates streamlines your financing journey with tailored solutions, fast approvals, and expert guidance, connecting you to trusted lenders for project success
A Privately Owned Independent Boutique Financier Whose Main Area of Focus is the UK Real Estate Market. Specialists in Raising Debt and Equity for Professional Sophisticated Investors and Developers.
Our core focus is offering fast solutions, financial products that deliver results, and the highest of service levels. If you would like to find out more please contact us to discuss your funding requirements.
Address: 2nd floor North Park House, The Precinct, High Road, Broxbourne, EN10 7HY, United Kingdom
Mobile: +44 (0) 20 3889 4403
Email: contact@hankzarihs.com
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