Auction Finance
Win a lot at auction and you have around 28 days to complete. This guide covers how bridging finance fits that deadline, what it actually costs, and what lenders want to see, plus a free quote if you want numbers for a specific lot.
Why auction buyers use bridging finance
Auction contracts exchange on the fall of the hammer. You pay a 10% deposit on the day and the balance is due at completion, typically 28 days later (some houses use 20 working days). A conventional mortgage, with its full valuation, underwriting and conveyancing chain, is rarely reliable inside that window, and many auction lots are unmortgageable anyway: no working kitchen or bathroom, short leases, structural issues, or sitting tenants.
Bridging finance exists for exactly this gap. It is a short term loan, usually 6 to 18 months, secured on the property and designed to complete fast. Auction specialists can often issue a decision in principle before auction day and complete within one to three weeks of the hammer.
What it costs, honestly
Interest is charged monthly rather than annually. Typical rates start from around 0.55% per month at lower loan-to-values on standard residential property, and most auction bridging sits somewhere between roughly 0.55% and 1.1% per month. On top of interest, budget for an arrangement fee (commonly around 2% of the loan), a valuation fee, and both your own and the lender's legal costs.
Loan-to-value normally tops out at 70-75%, so you need at least 25-30% of the purchase price yourself, plus the buyer's premium, stamp duty and any works budget. Run the full numbers with the auction cost calculator before you set a maximum bid.
Your exit strategy is the application
Because bridging is short term, the lender's first question is how you will repay. The two standard exits are a refinance onto a term mortgage (usually after refurbishment, once the property is lettable and mortgageable) or a sale. Be specific: a refurb-to-let exit backed by local rental comparables reads very differently from "I'll sort it out later", and it will show in the rate you are offered.
The timeline that works
Get a decision in principle before the auction, with proof of deposit funds ready for auction day. Instruct your solicitor and the lender's valuation the day you win. That leaves slack in the 28 days for the things that always take longer than planned. Late completion triggers penalty interest under the contract conditions and, at the extreme, forfeits your 10% deposit.
Auction finance FAQs
How fast can auction finance complete?
Bridging lenders who specialise in auction purchases routinely complete in one to three weeks, and some offer pre-approval before auction day so funds are effectively ready when the hammer falls. That comfortably fits the standard 28-day completion window. A conventional mortgage, by contrast, often takes six to twelve weeks and is the most common reason buyers miss the deadline.
What rates should I expect on a bridging loan?
Typical bridging rates start from around 0.55% per month for lower loan-to-value borrowing on standard residential property, with most auction loans falling somewhere between roughly 0.55% and 1.1% per month depending on LTV, property condition and your exit. Remember to price in the arrangement fee (commonly around 2% of the loan), valuation and legal costs, not just the headline rate.
How much deposit do I need?
Most bridging lenders go to 70-75% loan-to-value, so plan for at least 25-30% of the purchase price from your own funds, plus the buyer's premium, stamp duty and fees. You also need the 10% exchange deposit in cash on auction day itself, before any loan draws down.
What is an exit strategy and why do lenders care?
A bridging loan is short term, usually 6 to 18 months, so the lender wants to know exactly how you will repay it. The two standard exits are refinancing onto a term mortgage (typically after refurbishment, once the property is lettable and mortgageable) or selling the property. A clear, evidenced exit is often the difference between an approval and a decline, and it affects your rate.
Can I use a normal mortgage to buy at auction?
Sometimes, but it is risky. Many auction lots are unmortgageable in their current state (no kitchen or bathroom, short lease, structural issues), and even on a clean property a mortgage offer, valuation and conveyancing rarely all land inside 28 days. If you rely on a mortgage and it is not ready by the completion date, you face penalty interest and can lose your 10% deposit.
Should I arrange finance before or after I bid?
Before, always. Get a decision in principle with your maximum bid, the buyer's premium and works budget priced in, so you know your true ceiling. Auction contracts are unconditional: there is no 'subject to finance' clause, and no cooling-off period once your bid wins.