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.
Auction bridging loans can be approved and funded within days. This quick turnaround allows you to meet the 28-day completion deadline set by most auction houses.
These loans cover the funding 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 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, the primary challenge is going to be timing.
Auctions normally 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.
Loan to Value (LTV)
When you’re looking at bridging finance, understanding your loan-to-value (LTV) ratio is one of the most useful things you can learn.
It’s a key metric that affects both how much you can borrow and what you’ll pay for your bridging loan.
In this guide, we break down exactly what LTV means for bridging loans, show you how to calculate it yourself, and explain what different LTV ratios mean for your borrowing prospects.
how to work out your ltvWhy 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 reason to use bridging finance, these flexible loans can help with many other property-related situations:
Property Chain Solutions
If your property sale completion date doesn’t match up with your new purchase, bridging finance can prevent you from losing your dream home. This gives you breathing space until your existing property sells.
Property Refurbishment
Renovate uninhabitable or run-down properties with a refurb bridge. Once improved, you can either sell at a profit or refinance with a standard mortgage at the higher value.
Property Conversions
Transform properties from one use to another, such as converting offices to flats or houses to HMOs, including permitted development rights projects.
Planning Opportunities
Buy a property, obtain planning permission to enhance its value, then either sell it on or refinance based on the increased worth.
Business Funding
Business owners can use their property assets to access quick capital for time-sensitive opportunities, manage temporary cash shortfalls, or cover tax bills.
Inheritance Property Financing
Get advance funding against inherited property while waiting for probate to complete, helping with inheritance tax payments or other pressing financial needs.
Below Market Value Purchases
Act quickly when sellers need a fast sale at a reduced price, then either sell at full market value or refinance once you own the property.
Non-Standard Property Purchases
Acquire properties that standard lenders won’t finance due to structural issues or missing facilities, then improve them to meet normal lending criteria.
Land Acquisition
Secure land quickly while arranging planning permission or longer-term finance, particularly useful in competitive situations.
Commercial Property
Bridge the gap when buying business premises or mixed-use properties, allowing time to set up long-term commercial finance arrangements.
Development Completion Finance
Replace higher-cost development loans on completed or nearly finished projects, giving you extra time to sell units or let the property.
We specialise in arranging bridging loans for all these situations and many more. With our network of over 250 lenders, we’ll find the right short-term finance solution for your circumstances, whether it’s for auction purchases or any other property-related need.
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 3951 2828.
FAQ
We can arrange finance within 5-10 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.
Read more: Regulated vs Unregulated Bridging Loans
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.
Read more: Do You Need a Deposit for a Bridging Loan?
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.
Read more:
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.
Read more: How Bridging Loan Interest is Calculated and Charged
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.
Related reading: How to Work Out your Loan to Value (LTV)
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?
