What is auction finance?

Auction finance is a term used to describe a bridging or short term loan, used to purchase properties at auction.

Auction finance bridging loans are calculated on a case by case basis. This means you will need an exit strategy in place, as well as a deposit for the bridging loan.

Can you get a bridging loan on an auction property?

Yes. This is a common use for bridging loans. You usually have to settle the full amount owed on an auction property within a 28-day time frame, which is not enough time to arrange a conventional mortgage.

After you have paid the deposit for the property at auction, an auction bridging loan can quickly fund the outstanding amount, ensuring you don’t lose the sale. You then have time to arrange longer-term funding (e.g. a buy to let or commercial mortgage).

more content below

How can I use bridging to help with an auction property purchase?

If you intend to buy a property at auction, you can use a bridging loan to pay the auctioneer. This means you will be able to meet the shorter deadlines of the auction house. Auctioneers typically require settlement of costs within 28 days of the hammer falling.

If you need a bridging loan to finance an auction purchase, it is practical to arrange it before you go to an auction to buy property. This is so you know the maximum bid you can make, based on the borrowing you can achieve. You could arrange a bridging loan immediately after an auction, however, you risk not being able to achieve the borrowing you need and losing the on-the-day costs from the auctioneer – typically 5-10% of the property price.

Once you have ownership of the property, you can arrange (typically cheaper), long-term finance for the property as your ‘exit strategy’ from the bridging loan, which takes longer to organise.

more content below

What are the key features of auction finance?

Our team of specialist bridging advisors will work closely with you to find the right product to suit your needs from our panel of lenders. Each of these lenders will have their own criteria and features.

Common features of bridging loan auction finance are:
• Borrow up to 75% LTV (or more with additional security)
• No early repayment charges
• Flexible terms from a few months to over a year

How much can I borrow to buy a property at auction?

This will depend on the value of the property you wish to purchase, your deposit amount, financial situation and credit history. You can borrow from £25,000 and there is no set upper limit, the maximum you can borrow will be dictated by the other factors mentioned.

Generally speaking, the loan to value (LTV) on a bridging loan is up to a maximum of 75%, which would mean you would need a deposit of 25% of the property value. However, if you have other property with available equity that you can use as security, you may be able to borrow more than 75% LTV.

more content below

What our clients say about us