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In this comprehensive guide, we’ll explore practical methods to secure full funding for your next auction purchase, ensuring you don’t miss out on lucrative opportunities due to limited cash flow.
In this comprehensive guide, we’ll explore practical methods to secure full funding for your next auction purchase, ensuring you don’t miss out on lucrative opportunities due to limited cash flow.
100% auction finance enables investors to buy properties without having to provide a cash deposit upfront. Instead of using your personal savings, you utilise specialised financial strategies such as bridging loans, equity release, or cross-charging against existing assets. These methods allow you to leverage existing property equity or use other assets as collateral, creating opportunities for faster and easier investment.
Preserve Cashflow: No upfront deposit means you retain capital for refurbishments or other investments.
Increase Buying Power: Enables you to bid confidently at auctions without financial constraints.
Accelerate Portfolio Growth: More opportunities mean faster portfolio expansion and wealth accumulation.
Using a bridging loan secured not only on the property you're purchasing but also on additional property you own (cross-charge) can allow for 100% finance.
Example:
You wish to buy an auction property valued at £150,000. Normally, a 25% deposit (£37,500) is required. By offering an existing property (valued at £300,000 with a mortgage of £100,000) as additional security, you can borrow the full £150,000 purchase price, thus eliminating the need for a cash deposit.
If you own property with substantial equity, releasing funds against this property can provide the deposit and additional purchase costs needed for your auction property.
Example:
You own a buy-to-let property worth £400,000 with a £150,000 outstanding mortgage. Releasing £100,000 in equity from this property can cover your auction property deposit, SDLT, legal fees, and refurbishment costs, enabling a zero-deposit purchase.
Partnering with another investor can provide the capital required for the deposit, allowing you to complete auction purchases with no personal cash input.
Example:
A partner contributes the initial deposit and renovation funds, while you handle property sourcing, management, and resale. Profits are then shared as agreed, enabling you to invest with zero personal financial contribution.
A secured loan on your existing residential or investment property can free up capital to cover auction costs, enabling a zero-deposit transaction.
Example:
Taking out a second-charge loan of £50,000 against your residential home (worth £350,000 with £150,000 remaining on your mortgage) allows you to cover deposits, SDLT, and refurbishment without needing additional savings.
Understand the Risk: Leverage increases your financial risk; always have a solid exit strategy.
Evaluate Interest Rates and Fees: 100% finance usually carries higher rates; ensure costs are viable within your investment plan.
Timeframe for Exit: Plan carefully for refinancing or sale, ensuring you can repay bridging finance on time.
Pre-Auction Approval: Get your bridging or second-charge loan approved beforehand to bid confidently.
Comprehensive Documentation: Provide lenders with valuations, proof of income, and clear property details upfront.
Work with Specialists: Choose lenders and brokers who specialise in auction finance for faster approval.
Investor Profile: Sarah, a property investor based in Manchester.
Scenario:
Sarah wanted to buy a semi-detached property at auction listed for £200,000 but lacked sufficient funds for the deposit.
Solution:
Sarah owned a rental property valued at £300,000 with an outstanding mortgage of £100,000. Using cross-charge bridging finance, Sarah secured 100% of the £200,000 purchase price without using any savings.
Outcome:
Sarah refurbished the property within three months, refinanced onto a buy-to-let mortgage at £275,000, paid off the bridging loan, and released surplus funds for future investment.
A: Qualification usually requires owning existing property or assets for collateral, good credit history, and a clear exit strategy.
A: Bridging loan rates typically range between 0.6% to 1% per month, varying based on lender, security, and credit profile.
A: Approval can be as fast as 24–48 hours if pre-valuation and documentation are in place.
A: The lender may enforce a sale of the secured property. Always ensure you have a viable refinancing or sale exit plan.
Ans: Yes, Catalyst allows early repayment without penalties, potentially saving you interest costs.
At Auction Finance, we specialise in helping investors secure 100% auction finance quickly and efficiently. Our expert team guides you through the entire process, from application to funding.
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