Auction purchases in the UK usually exchange on the day the hammer falls, and the contract then has to complete within a short deadline, commonly 28 days. A high-street mortgage is rarely arranged in that time. Auction finance is a bridging loan secured on the property, used to complete the purchase and later repaid by a sale or by refinancing onto a mortgage.
What to arrange before you bid
Speak to a lender or a comparison service before the auction, not after you have won. A decision in principle tells you what you may be able to borrow and stops you bidding beyond that figure. Send the legal pack to your solicitor and the lender as early as you can, because title problems are what usually use up the 28 days.
Read the special conditions, the guide price and the completion date. Budget for the deposit you pay at the auction, the buyer's fee, stamp duty, valuation and legal costs, as well as the bridging interest. Our auction finance page sets out the usual steps, and the bridging loan calculator shows how a monthly rate and a fee add up. There is no broker fee for asking us to compare options.
How the loan is put in place
Funding on the site is considered from £25,000. A decision in principle can often be given within 24 hours of a complete enquiry, and straightforward cases can complete in as little as 7 days once the valuation and legal work are done. The lender looks mainly at the property, the loan-to-value and how you will repay.
Interest is charged monthly. The range described across this site is typically 0.4% to 1.5% per month, depending on the property, the term and the loan-to-value. Arrangement fees are often 1% to 2% of the loan, plus valuation and legal fees. Interest can usually be paid each month or rolled up and repaid at the end. These figures are illustrative, not an offer.
Due diligence that protects the bid
Check the legal pack for restrictive covenants, short leases, missing planning consent, sitting tenants and works that a mortgage lender would refuse. Bridging can fund a property that is not yet mortgageable, which is why people use it for auction stock that needs a kitchen, a bathroom or structural work. That only helps if the term is long enough to finish the works and then sell or refinance.
Set a maximum bid that includes the loan costs, and stop there. Winning above that number is the most common way an auction bridge becomes expensive.
How the loan is repaid
Lenders want a credible exit before they offer terms. The usual routes are refinancing onto a mortgage or buy-to-let loan once the property is habitable or let, or selling after the works. If the exit is a refinance, talk to that lender early enough to know the property will qualify. If the exit is a sale, allow time for marketing after the works, not only for the works themselves.
If completion of the auction contract is at risk, tell the lender and your solicitor immediately. Missing the deadline can mean losing the deposit. Building a short buffer into the timetable is safer than assuming every party will move at the fastest possible speed.
Questions buyers ask
Should finance be agreed before the auction?
Yes. A decision in principle and a legal-pack review before the sale tell you whether the property and the price are fundable.
Can the loan cover a property that needs work?
Often, yes. That is a common reason to use bridging rather than a mortgage. The lender will still want a valuation and a realistic exit.
Do I still need a deposit?
Yes. You normally pay a deposit when contracts are exchanged at the auction. The loan funds the balance up to the lender's loan-to-value limit, not the whole purchase plus every cost, unless extra security is available.
Next step
If you have a lot in mind, send the address, guide price, loan amount and exit to Adam on 07973 197535 or via the contact form. We compare a wide panel of UK bridging lenders. There is no broker fee, and any lender costs are explained before you proceed. For purchases that are not at auction, see property bridging loans.