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Auction Finance

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Gary Hemming Headshot

Author: Gary Hemming CeMAP CeFA CeRGI CSP
20+ years experience in bridging loans

What is auction finance?

Auction finance is a type of bridging loan that is used to purchase a property at auction. Bridging loans are used to purchase properties at auction as they can comfortably be processed in the 28-day completion timescale that is required when buying an auction property.

When buying a property at auction, certain rules must be followed. Firstly, the winning bidder must pay 10% of the purchase price on the day of the auction. You must then complete within 28 days (for residential properties, commercial and land may have slightly longer deadlines to allow for more complex processing).

If you fail to come up with the money at the end of the 28 days, you will lose your deposit and the right to buy the property.

Traditional mortgages can take time to complete, especially for unusual or commercial security. As a result of this, they leave you at risk of losing your deposit and costs.

How does auction finance work?

Auction finance works by giving you a short-term loan on an interest only basis, often with no monthly repayments to make. Generally, applications can be completed within 14 days, which is ideal for auction purchases. Assuming you have enough deposit (or are able to offer another property as additional security), and a solid exit strategy, your application stands a great chance of success.

As mentioned earlier, auction finance is a short-term loan, usually with a loan term of 1-18 months, although terms of up to 36 months are available.

Your exit strategy is how you plan to repay the loan at the end of the term (or before). Common exit strategies include a remortgage to a traditional mortgage, sale of the security property and sale of another asset.

Key product features

Key features

Max LTV Up to 85%
Interest rate From 0.43% per month
Charge types1st, 2nd & 3rd considered
Term1-36 months (maximum 12 months for regulated loans)
Interest typeAdded to the loan, deducted or serviced
Completion timescale5 days – 3 weeks


  • Residential, commercial property or land acceptable
  • Available to individuals, partnerships, LLPs, Ltd companies, offshore companies, foreign nationals and pension funds
  • Minimum applicant age 18 years – no maximum age
  • Available in England, Scotland, Wales and Northern Ireland
  • Adverse credit accepted (on a case by case basis)

What information is needed to make an auction finance application?

In order to make a property auction finance application, you will usually need to provide the following information:

  • Details & address of the property to be purchased
  • A copy of the auction sales particulars
  • Details of your exit strategy
  • Your own personal details (name, address, date of birth, etc)
  • Details of your plans for the property once purchased

What kind of properties can auction finance be used to purchase?

Auction finance can be used to purchase the following types of properties:

  • Residential property
  • Retail units
  • Property in a poor state of repair
  • HMOs
  • Semi-commercial property
  • Land with planning
  • Land without planning
  • Farms
  • Leisure complexes
  • Hotels
  • Guest houses
  • Pubs
  • Care homes
  • Shops
  • Offices

What kind of interest rates will I pay?

Auction finance interest rates are between 0.43-0.85% per month, in most cases.

The lowest rates are usually reserved for lower LTV applications, with loans at 50% or below securing the best terms. This is because auction finance lenders price their applications to risk, and greater equity in the property reduces the risk of financial loss to the lender.

The interest rates charged on residential property are lower than those charged for an equivalent commercial property or land.

What are the fees associated with auction finance?

In addition to the interest charged when taking out property auction finance, you’ll usually be expected to pay a number of fees. They are:

Lender arrangement fee – This fee is charged by the auction finance lender and is usually 1-2% of the loan amount. It is paid on completion and can usually be added to the loan.

Lender exit fee – Although it is becoming less common, some lenders charge an exit fee when auction finance is repaid. Where charged, this would usually be 1 month’s interest.

Broker fees – Although we don’t charge a fee for arranging auction bridging finance many brokers do. This fee is usually between £500 and 1.5% of the loan amount.

Valuation fee – In some cases, a physical inspection of the property by a chartered surveyor is needed. In many cases, we can avoid this by undertaking an electronic valuation, which can save you money.

Legal fee – This fee is paid to the solicitors for completing the legal work. Usually, both your own and the lender’s legal fees must be met by the borrower.

Is auction finance quick?

Yes, auction finance is a very quick way to secure the funds needed to purchase a property at auction, with applications usually completing in 5-21 days. Where possible, auction finance can often be completed in 7 days or less.

How much can I borrow?

Auction finance loans can range from £25,000 with no maximum loan size. The maximum loan to value for auction finance is 80% or up to 100% with additional security. Where the property you’re buying will be refurbished, we may be able to fund up to 85% LTV in some situations.

How can I apply for auction finance?

To apply for auction finance you should take a step by step approach and not rush into a decision. Firstly, plan ahead and identify a property that you’re looking to buy and take time to understand how much you are willing to pay, how much you need to borrow, and gain an understanding of your finance costs.

Before you dive into the process, there are a few things you can do to make sure the application process runs seamlessly:

  • Prepare your documents – pull together the key documents that a lender will need in order to assess your application. You’ll need details of your exit strategy, proof of deposit, and details of your plans for the property. If you plan on refurbishing the property, a basic breakdown of the works planned and their costs will also be needed.
  • Download your credit report – your credit history may impact which auction finance lender best suits your circumstances. Downloading your credit report will allow your broker to easily understand your financial past.
  • Speak to an experienced broker – Speak to ourselves, or another experienced auction finance broker who will run through your circumstances and run through your options. It’s important that your chosen broker has plenty of experience in arranging this type of finance as it’ll improve your chances of getting the best deal and being approved.
  • Understand how to choose the right product – It’s important that you understand which auction finance deal is best. Always look at the overall cost of the loan and also consider hidden fees and penalties for early, or late repayment.

What are the alternatives to auction finance?

The alternatives to auction finance are residential mortgages, buy to let mortgages and commercial mortgages. While these options generally come with lower costs than property auction finance, they are all unlikely to complete within the 28 day auction deadline.

 As such, it’s important that you always have a backup plan in place when looking to buy property at auction using an alternative type of finance.

What are the benefits of buying a house at auction?

The benefits of buying a property at auction are:

  • They offer an excellent opportunity to pick up a bargain property.
  • Auction properties allow you to complete property purchases quickly without the risk of the vendor looking to change the deal later on.
  • The bidding process is completely transparent as you can see other offers being placed on the property in real time.
  • The legal pack is produced prior to the auction, meaning you know the legal status of the property before bidding.
  • Properties at auction can be up to 30% cheaper than those bought on the open market.

Will I be eligible?

Yes, there is a good chance that you’ll be eligible for auction bridging finance as long as you have sufficient deposit or equity.

Auction finance can be taken out by individuals, partnerships, LLPs, Ltd companies, pension funds and trusts.

Auction finance for non-UK nationals and non-UK residents can be considered.

We can even offer property auction finance to borrowers with a bad credit history such as defaults, CCJs, IVAs and previous bankruptcy. Those with bad credit history should ensure their finance is pre-approved prior to the auction. This reduces the risk of problems in obtaining finance after a bid has been accepted.


Read some of the questions that we’re often asked by people who are looking to finance property auction purchases.

Why use a specialist broker?

Although this type of finance can complete quickly, that’s not to say that this will always happen.

The process is not as straightforward as people often think and the key to making sure there are no delays comes down to solving problems quickly as they arise.

You will always get questions from the lender and experience is crucial in managing the process.

Can I get 100% auction finance?

Yes, you can get 100% auction finance to borrow 100% of your auction purchase price, however, you’d need to offer additional security over another property to do this.

It’s also important to consider that upon winning the auction, most auction houses insist on a 10% deposit immediately. As your application can’t be completed instantly, you would need to put down the 10% deposit, getting it back once your loan completes.

Is it easy to get auction finance for first time buyers?

For a first-time property owner, funding is available, but buying at auction is inherently risky and care should be taken.

Can you fund development plots?

Yes, we can fund the acquisition and development. We can fund land up to 65% LTV and can usually achieve rates from 0.95% per month for smaller plots. For larger plots with planning, where works commence immediately, we can offer full development finance from 5.65% over one month LIBOR.

Will I need a valuation report?

Yes, in most cases, a valuation report is needed. That said, some lenders will lend without a valuation report. This lending can be based on either the auction purchase price or a desktop, or ‘AVM’ valuation.

How much deposit will I need?

You’ll need at least a 15% deposit (assuming a maximum loan to value of 85%). This means you’d need to put down £15,000 for every £100,000 of property value.

For more information on auction purchases, read our guide to the key professional tips for buying property at auction.