Before bidding for a commercial property at auction, it’s essential that you have the finances in place to complete the transaction. As explained elsewhere in this guide, if your bid is successful you will be expected to be in a position to pay an immediate 10% deposit and legally bound to complete the sale 28 days later.
Therefore, if you require a commercial mortgage, this should be organised well in advance of auction day. Alongside established high street banks and building societies there are a number of companies that specialise in providing commercial finance. However, all these institutions will expect you to be credit worthy and able to invest a sum of your own money before agreeing to offer a mortgage.
It may be the case that the greater the amount you can invest yourself, the greater your chance of securing a promise of the balance from a commercial mortgage lender. Typically, you may be expected to provide up to 35% of the property value yourself in the current economic climate.
If you are successful you may be offered a loan including the elements listed below;
1) A long term mortgage with a term of 20-25 years
2) A choice of fixed or variable repayments
3) Capital repayment holidays
It’s possible that lenders may seek to impose conditions on the loan so you should check the terms and conditions carefully before committing yourself. For example, a break penalty may apply to fixed rate loans that could prove costly. Most importantly, you should remember that any other property offered as collateral, including your home, could be at risk if you are in breach of your repayment obligations.
Viewing a Commercial Property for Auction
VAT on Commercial Property Purchase at Auction