Auction Bridging Finance: Complete Your Property Purchase in 28 Days
Auction bridging finance provides a quick and adaptable solution for property investors aiming to capitalise on auction opportunities.
This short-term funding option enables you to meet strict auction deadlines and finalise your purchase by the 28 day deadline, giving you an edge in the competitive property auction market.
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What Is Auction Bridging Finance?
Auction finance is a specialised type of short-term bridging loan designed for auction property buyers.
Unlike standard mortgages, which often take 6-8 weeks to arrange, auction bridging loans can be approved and funded within days. This quick turnaround allows you to meet the typical 28-day completion deadline set by most auction houses.
These loans cover the gap between the auction purchase and either the property’s sale or refinancing with a long-term mortgage.
They’re particularly useful when you’ve identified a promising deal and need to act swiftly, or when the property doesn’t qualify for immediate traditional mortgage lending.
Benefits of Auction Bridging Finance
Choosing auction bridging finance offers several advantages, allowing you can act decisively at auctions, knowing you have the financial support to complete the purchase on time.
Quick completion
Meet the 28-day auction deadline confidently, securing your deposit.
Improvement funds
Borrow additional money to refurbish or develop the property, boosting its value before refinancing or selling.
Increased leverage
Use bridging finance to purchase and improve a property, potentially securing better terms when refinancing with a traditional lender.
Investment acceleration
Ideal for investors targeting properties with long-term income potential, allowing you to acquire the asset quickly and make necessary improvements.
Key Features of Auction Bridging Finance
Bridging Finance London offers tailored auction bridging loans to suit diverse needs.
Our extensive network of over 250 lenders allows us to source the most suitable terms, whether you’re an experienced investor or new to property auctions.
- All property types considered
- Loan amounts from £150,000 to £100 million
- Maximum Loan-to-Value (LTV) ratio of 80%
- Flexible terms from 3 to 36 months
- Available for borrowers aged 18 to 85
- Choice of rolled-up or serviced interest options
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How Auction Bridging Finance Works
The process of using auction finance typically follows these steps:
- Pre-auction preparation: Secure a DIP before the auction to establish your budget.
- Winning bid: Upon winning, pay the required deposit, usually 10% of the purchase price.
- Loan application: We’ll assist you in finalising your bridging loan application, including property valuation.
- Approval and funds transfer: Once approved, funds are transferred to complete the purchase within the 28-day deadline.
- Loan term: Either service the interest monthly or have it rolled up into the loan.
- Exit strategy: Repay the loan through sale, refinancing, or another agreed method.
Rolled-up interest means no monthly payments; instead, the interest accumulates and is paid at the term’s end. Serviced interest involves monthly interest payments, which may be preferable if you have sufficient cash flow.
Why Can’t I Use a Regular Mortgage?
You are free to use a regular mortgage as funding for an auction property purchase.
However, for long-term mortgages the primary challenge is timing.
Auctions typically require legal completion within 28 days of the winning bid, while regular mortgages can take 4-6 weeks to arrange.
Long-term lenders aren’t geared up to process applications in a matter of days.
Property condition is another hurdle. Many auction properties are in poor condition or uninhabitable, making them ineligible for standard mortgage lending until renovated.
Bridging finance offers more flexibility in terms of property type and condition. It also allows for rolled-up interest, beneficial for those planning quick renovations and resale.
The short-term nature of bridging loans aligns well with many auction buyers’ goals.
Who Benefits from Auction Bridging Finance?
Auction bridging finance serves various property buyers:
- Property investors expanding their portfolios quickly
- Buy-to-let landlords seeking properties to refurbish and let
- Developers acquiring and improving properties for resale
- First-time auction buyers needing faster finance than traditional mortgages allow
Even if you’re new to property auctions, our team can guide you through the process, ensuring you have the financial backing to secure your chosen property.
Eligibility Criteria
The basic criteria for auction bridging finance includes:
- Age: Applicants must be 18-85 years old
- Residency: Available to UK residents, expats, and foreign nationals
- Property types: We consider all property types, from residential to commercial and semi-commercial and plots of land
- Credit history: While good credit is advantageous, we often find solutions for those with less-than-perfect credit
We assess each application individually, considering factors such as the property’s potential, your experience, and the strength of your exit strategy.
Read more:
Rates and Fees
While auction loans have higher interest rates than traditional mortgages, its short-term nature and added flexibility often make it cost-effective for auction purchases.
Auction bridging finance costs typically include:
- Interest rates: Monthly, these vary based on LTV ratio, property type, and your circumstances
- Arrangement fee: Usually 2% of the loan amount
- Valuation fees: Dependent on property value
- Legal fees: You pay yours and the lenders
- Exit fees: Some lenders may charge these; we’ll always clarify this upfront
The Application Process
Securing auction finance is relatively straightforward:
- Initial enquiry: Contact us with details of your auction property and financial requirements.
- Assessment: We’ll quickly evaluate your situation and provide indicative terms.
- Decision in Principle: This gives you confidence to bid at auction.
- Full application: Once you’ve secured the property, we’ll proceed with the full application.
- Valuation: A valuer will assess the property to confirm its worth.
- Offer and legals: Lender sends you a formal offer and awaits solicitors.
- Completion: Funds are released to complete the purchase within the auction deadline.
Our experienced team will guide you through each step, ensuring a smooth and timely process.
Why Choose us for Your Auction Finance?
Selecting the right financial partner for your auction purchase is important.
Our team’s extensive experience in property and finance means we offer insights and expert guidance throughout your auction journey.
- Access to over 250 lenders, ensuring optimal terms for your needs
- Expertise in high-value and complex cases, with loans up to £100 million
- Personalised service tailored to your specific circumstances and goals
- Quick decision-making to meet tight auction deadlines
- Ongoing support from initial enquiry through to completion and beyond
Other Uses for Bridging Loans
While auction purchases are a common use for bridging finance, these versatile loans can support various property-related needs:
Chain-break financing: If you’re selling one property but the dates don’t align with your new purchase, a bridging loan can help you secure your new home without losing it.
Property refurbishment: Bridging loans can fund renovations on uninhabitable properties, making them suitable for traditional mortgage lending or increasing their value for sale.
Planning gain: Secure short-term finance to buy a property, obtain planning permission, and sell at a profit or refinance based on the enhanced value.
Business cash flow: Companies can use bridging loans against property assets to manage short-term cash flow needs, fund VAT bills or seize time-sensitive opportunities.
Probate cases: Use a probate loan to access funds from inherited property before the formal probate process completes, helping with inheritance tax or other immediate financial needs.
Below market value purchases: Move quickly on good deals where the seller needs a fast sale, then refinance or sell at market value.
Unmortgageable property purchases: Buy properties that don’t qualify for traditional mortgages due to issues like lack of kitchen or bathroom, then refurbish to make them mortgageable.
Development exit loans: Refinance to repay development finance on completed or nearly completed projects, providing more time for sales or letting.
Land purchases: Acquire land quickly, then refinance or sell once planning permission is obtained.
Commercial property purchases: Bridge the gap when buying commercial property and semi-commercial property, allowing time to arrange long-term commercial mortgage finance.
At Bridging Finance London, we can help structure bridging loans for these and many other scenarios. Our expertise and wide lender network ensure we can find the right solution for your specific needs, whether it’s for auction purchases or any other short-term property finance requirement.
Need some help?
If you need a short-term bridging loan then a specialist broker is a good place to start. You will get expert help and advice along with a wide range of lenders to choose from.
To speak with a specialist broker, please call us on 020 3488 5706.
FAQ
We can arrange finance within 5-14 days, comfortably meeting the typical 28-day auction completion deadline.
Yes, we arrange bridging finance for all property types, including commercial, residential, unmortgageable properties and mixed-use.
It’s also possible to get a bridging loan for land, which has planning permission in place.
It’s important to have a solid exit strategy and a Plan B.
If unforeseen circumstances arise, we can often help negotiate extensions or obtain a re-bridge loan from a new lender.
Related: How Do You Pay Back a Bridging Loan?
It depends on the property use.
Loans for residential properties you intend to live in are regulated by the Financial Conduct Authority (FCA).
Investment property loans are unregulated.
Yes, we can arrange auction bridging finance for first-time buyers. However, you’ll need a clear exit strategy and may require a larger deposit compared to experienced investors.
Typically, you’ll need a minimum deposit of 20-25% of the property’s value. However, this can vary based on the property type, your experience, and the strength of your exit strategy.
If you face delays, contact us as soon as possible. We can often negotiate with the lender to extend the loan term or find alternative solutions, such as refinancing onto a different product.
Auction finance is faster to arrange, more flexible, and shorter-term than regular mortgages. It also has higher interest rates but allows for interest to be rolled up and paid at the end of the term.
Yes, most lenders allow early repayment. Some may charge an early repayment fee, but many of our lenders offer this option without penalties. We’ll clarify this for you when arranging your loan.
You’ll need proof of ID, proof of address, bank statements, details of the property you’re purchasing, and an outline of your exit strategy. For business applications, we may also require business accounts and a business plan.
Interest rates depend on several factors, including the loan-to-value ratio, the property type, your experience, and the perceived risk of the loan. We work with a wide range of lenders to secure the most competitive rates for your circumstances.
We have over 250 lenders at our disposal. Officially, the maximum bridging loan size is £100m. In reality, bridge lenders exist to do deals, so for the right deal they would be able to lend above £100m.
High street banks have a limited presence in the bridging loan market (and in the high street!).
While some major banks like Barclays and NatWest offer bridging products, their offerings are restricted when compared to specialist lenders.
High street banks have stricter criteria, longer processing times, and less flexibility in their bridging loan products.
Read more: Do High Street Banks Offer Bridging Loans?
