Can I use a revolving credit facility to complete an auction purchase within the 28-day deadline?

Can I use a revolving credit facility to complete an auction purchase within the 28-day deadline?

Buying a property at auction is a popular way for UK property investors to expand their portfolios quickly. However, the traditional auction process comes with a major hurdle: the strict 28-day completion deadline. If you do not have the cash ready, securing a standard mortgage in time is highly unlikely. This is where alternative finance options become essential for landlords.

A secured Buy-to-Let (BTL) revolving credit facility from Promise Money may provide the perfect solution. But how exactly does this facility help you meet the deadline, and is it the right choice for your next auction purchase?

What is a Secured Buy-to-Let Revolving Credit Facility?

A revolving credit facility for landlords acts like a secured property overdraft. It is not an unsecured business loan, credit card, or generic business line of credit. Instead, it is a secured financial product that is registered as a second charge against an existing residential buy-to-let property in your portfolio. This means it sits behind your existing first-charge mortgage, leaving your current mortgage rate unaffected.

With this facility in place, you can draw down funds up to a pre-approved limit, repay them, and draw them down again as needed without having to reapply. Crucially, you only pay interest on the money you have actually drawn, not the entire limit of the facility. This flexibility is what makes it highly attractive for active property investors.

Meeting the 28-Day Auction Deadline

When you win a property at a UK auction, you typically must pay a 10% deposit immediately. You then have exactly 28 days to pay the remaining 90% balance. If you fail to complete within this timeframe, you risk losing your deposit and facing significant financial penalties.

If you try to apply for a new mortgage or a traditional secured loan after the hammer falls, you will struggle. Underwriting, surveys, and legal checks usually take several weeks or even months. To use a revolving credit facility for an auction purchase, you must arrange the facility before you attend the auction.

Once the facility is active, you can typically draw down the funds within 24 to 48 hours. This rapid access to cash allows you to complete the auction purchase smoothly within the 28-day window. You can read more about standard buy-to-let rules and requirements on the MoneyHelper website to see how this fits into your wider investment strategy.

Comparing Your Options: Revolving Credit vs. Bridging Finance

Historically, property investors have relied on bridging finance to secure auction properties. Here is how they compare.

Bridging Finance

Bridging loans are short-term funds structured as “open” (no fixed repayment date but has a maximum term) or “closed” (has a clear exit strategy and fixed repayment date). With most bridging loans, monthly payments are not typical. Instead, interest is rolled up and paid as a lump sum at the end of the term. If you fail to repay, default implications can be severe, leading to legal action, repossession, increased interest rates, and additional charges. Your property may be at risk if repayments are not made.

Secured Revolving Credit

A revolving credit facility provides ongoing flexibility. You set it up once and can use it repeatedly for deposits, completion balances, or refurbishments. Once you refinance or sell, you repay the drawn funds. The facility remains active for your next project without repeated arrangement fees.

What About Remortgaging?

Remortgaging to release equity can take months, which is far too slow for an auction deadline. It may also trigger early repayment charges on your current mortgage. A second-charge revolving credit facility leaves your first mortgage untouched, preserving your existing rate.

Real Landlord Scenarios

To understand how this facility works in practice, consider these common investor scenarios:

Scenario 1: The Fixer-Upper Auction Purchase

A landlord wins a run-down terraced house at auction. Having set up their revolving facility in advance, secured against an existing BTL property, they draw funds within 48 hours to complete. They also draw extra cash to refurbish the house, eventually remortgaging to repay the facility.

Scenario 2: Covering Void Periods and EPC Upgrades

An investor renovates several properties to upgrade their EPC ratings. During void periods, they draw from their revolving credit facility to cover refurbishments and mortgage payments. They repay the drawn amount once new tenants are in place.

Key Steps to Get Started

Because a revolving credit facility is a secured second-charge product, lenders will assess the equity in your existing buy-to-let properties. Having a clean credit history can improve your chances of securing competitive rates.

To check your credit file before applying, you can use a professional credit monitoring service. Get your free credit search here. It’s free for 30 days and costs £14.99 per month thereafter if you don’t cancel it. You can cancel at anytime. (Ad)

As an FCA-authorised broker (Ref: 681423), Promise Money is not a lender. We work with a wide panel of specialist lenders to help you find a suitable facility tailored to your portfolio. You can speak to our expert team by calling us on 01902 585020 or by visiting our hub at promisemoney.co.uk/landlord-revolving-credit-100 to explore your options.

People also asked

Can I use revolving credit for a property deposit?

Yes, you can use a secured revolving credit facility to fund a deposit for a new property purchase, provided you have sufficient equity in your existing secured portfolio.

How quickly can I access funds from a revolving credit facility?

Once the facility is fully set up and active, you can typically draw down funds within 24 to 48 hours of making a request.

Is a BTL revolving credit facility an unsecured loan?

No, this is a secured financial product that is registered as a second charge against your existing buy-to-let property, meaning your property is used as collateral.

Do I pay interest on the whole credit limit?

No, you only pay interest on the money you have actually drawn down from the facility, not on the total limit available to you.

What happens if I cannot repay my revolving credit balance?

Because the facility is secured against your property portfolio, failing to keep up with repayments could lead to additional charges, increased interest rates, legal action, and potential repossession of your properties.