At a glance
- Traditional auctions: exchange on the fall of the hammer, completion usually within 28 days
- Modern method auctions often allow longer, but add a reservation fee
- Get an agreement in principle before you bid
- Exit is usually a mortgage after works, or a resale
What is auction finance?
Auction finance is bridging finance used to buy property at auction. It is the same kind of short-term loan as any other bridge, but arranged to fit the tight timetable auctions set.
Standard mortgages rarely complete fast enough, and many auction lots are properties a mortgage lender would decline anyway: homes needing modernisation, unusual construction, short leases or repossessions.
Auction deadlines
Traditional auction: when the hammer falls you have exchanged contracts. You pay a deposit, usually 10%, on the day, and completion is normally due within 28 days. Miss it and you can lose your deposit and face further costs.
Modern method of auction: the winning bidder usually pays a non-refundable reservation fee and gets longer to exchange and complete, often 28 days to exchange and a further 28 to complete. Always check the auction's own terms, because they vary.
Read the legal pack before bidding. It sets out the completion date, any special conditions and extra costs you will be liable for.
What to arrange before you bid
- An agreement in principle from a lender, based on the lot and the amount you need.
- Your deposit and enough cash for fees and buyer's premium.
- A solicitor who has reviewed the legal pack and can act quickly.
- A clear exit - refinance or resale - and a rough timetable for any works.
Some lenders can arrange valuations before the auction, which speeds things up after you win.
How much can you borrow?
Lenders lend against the lower of the purchase price and the valuation, commonly up to around 70% to 75% LTV. With an auction you are paying the deposit on the day, so the bridge usually covers the balance. If you need more, some lenders accept additional security over another property you own.
Costs to budget for
- Monthly interest, often rolled up or retained so you have nothing to pay until you exit
- Arrangement, valuation and legal fees
- The auction house's buyer's premium and any costs in the legal pack
- Stamp Duty Land Tax, or the Scottish or Welsh equivalent
Exit strategies
Most auction buyers exit by refinancing onto a mortgage once the property is habitable or let, or by selling after improvements. If works are needed first, look at refurbishment bridging, which can release funds for the works as well as the purchase.
Frequently asked questions
How long do I have to complete after an auction?
For traditional auctions, completion is usually due within 28 days of the auction. Modern method auctions often allow longer. The exact deadline is in the legal pack.
Can I get auction finance after I have won the lot?
Yes, but it is much riskier. Arranging an agreement in principle before you bid gives you the best chance of completing on time.
What happens if I cannot complete in time?
You are likely to lose your deposit and may be liable for further costs. That is why arranging finance early matters.
Can I use auction finance for a property that needs work?
Yes. Bridging lenders regularly lend on properties that mortgage lenders would not, and some can fund the works too.
Is auction finance regulated?
It is regulated if you or a close family member will live in the property. If you are buying as an investment it is usually unregulated.
Important: Your home or property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. Think carefully before securing other debts against your home.
This page is general information, not financial advice. Bridging Finance Comparison is a free to use lead generation service run by The Lead Advisory Company Limited. We are not a lender and do not give advice. We introduce enquiries to Curzon Financial, who are authorised by the Financial Conduct Authority (FCA), who may provide advice and arrange finance where appropriate. Rates, fees and criteria depend on your circumstances and the lender.