Auction Finance
Finance Your Auction Purchase With ABC Finance
Get a fast bridge loan to fund an auction purchase today. Raise funds quickly at low interest rates with ABC Finance.
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Fast auction finance by ABC Finance
Secure finance quickly at a low interest rate with ABC Finance. We can negotiate with lenders to find you the best possible deal.
Getting a quote is easy, our advisors will call you back for a confidential, friendly no-obligation discussion. If you wish to proceed they will help you fill in a simple form to begin searching for the right lender for you. Initial approval can move quickly and in some cases funding could be made available within a few days.
Speak to Lee about financing an auction purchase
If you need to secure a loan quick to complete an auction purchase then ABC Finance is here to help, speak to Lee today for a free no obligation quote.
Lee Hemming is a specialist bridging loan advisor at ABC Finance with years of experience arranging the right finance solutions for our customers. Call, email or contact ABC Finance today to learn more.
Request a free auction finance quote
Complete the form below to receive a fast and free quote from our expert property & auction financing team.
How quickly can I access funding?
Auction finance is a 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 are available from £25k up to £250m. The amount you can borrow depends on the value of your auction property and what you plan to do with it.
The majority of lenders will loan up to 75% of the property’s value, also known as Loan To Value (LTV.) Loans up to 75% LTV are regulated by the Financial Conduct Authority, however, unregulated loans beyond this figure are possible up to 85% LTV.
Our maximum loan to value for auction finance is 80% but can extend up to 100% if you are able to provide additional security in the form of another property or valuable collateral. However, this is rare and usually reserved for commercial properties.
If the property you are buying will be refurbished, we may be able to fund up to 85% LTV.
Auction finance key features
Max LTV
Up to 85%
Interest rate
From 0.43% per month
Charge types
1st, 2nd & 3rd considered
Term
1-36 months (maximum 12 months for regulated loans)
Interest type
Added to the loan, deducted or serviced
Completion timescale
5 days – 3 weeks
What kind of properties can auction finance be used to purchase?
Auction finance can be used to purchase a diverse range of properties and a bridging loan gives much more flexibility than a mortgage in this area. Common uses for auction finance are purchasing the following types of property:
- Residential property
- Property in a poor state of repair, this is particular common with auction properties
- Semi-commercial property
- Land with and without planning permission
- Farms
- Leisure complexes
- Hotels
- Guest houses
- Pubs
- Care homes
- Shops and retail units
- Offices
- Houses of Multiple Occupancy (HMO), this is where at least three tenants share a house.
Auction finance criteria
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)
Why choose ABC Finance?
Established 2000
ABC Finance has been helping people get the best deal since 2000.
FCA Regulated
We’re fully regulated by the Financial Conduct Authority
We Save You Money
Our entire ethos is built around helping people save money.
What our customers say
Anita Q
Trustpilot
I cannot thank Richard and Sophie enough for helping me at a time when I needed financial guidance and support. They were simply amazing.
Daniel M
Reviews.io
Very professional in every way, the fees are extremely reasonable compared to other companies, thanks guys
B. Barber
Reviews.io
I am not normally one to leave reviews, however, the service I have received from ABC Finance is exceptional and I would recommend them to anyone who is struggling to find a reliable service.
Our awards & recognition
Commercial Finance Service of the Year
2022 Winner
Best Commercial Financial Experts (Midlands)
2022 Winner
Commercial Finance Company of the Year
2022 Winner
Best Broker: Commercial and Specialist Finance Broker of the Year / Bridging
2022 Nominated / 2020 Shortlisted
Request a fast & free property finance quote
Complete our quote request form below and a member of our bridging loans team will find the best deals for you.
Fast and Flexible
Property bridging finance solutions with written terms in 2 hours and funding within 72 hours
Expert Team
Friendly specialist team to guide you through the process
A range of funding options
Loan from £10k to £2m for residential and commercial purposes
Low Interest Rates
Rates from as low as 0.43%
Our recent bridging loan success stories
Quick Regulated Bridging Loan Secured for Property Purchase
Urgent Bridge On An Un-Mortgageable Property
Bridging Loan Secured for Quick Auction Purchase
Learn more about auction finance
We’ll now look in more details at some of the key points that you should consider and understand when looking to use a bridging loan to fund an auction purchase.
In this article:
- What is auction finance?
- How does auction finance work?
- What interest rates are available for auction finance?
- What are the fees associated with auction finance?
- How is auction finance repaid?
- What does the auction finance process look like?
- What information is needed to make an auction finance application?
- How can I apply for auction finance?
- Will I be eligible for auction financing?
- What are the alternatives to auction finance?
- Frequently asked questions
What is auction finance?
Auction finance is a type of bridging loan that is used to purchase a property at auction.
Bridging loans are often used to finance auction purchases owing to their speed of arrangement. A bridging loan 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 the purchase within 28 days if you are buying a residential property. The completion timescales for commercial properties and land purchases may have slightly longer deadlines to allow for more comprehensive due diligence and legal checks.
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. If you are seeking to arrange a mortgage in a very short timescale you may be at 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.
If you have enough money for a deposit (or are able to offer another property as additional security), and a solid exit strategy, your application stands a greater chance of success.
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.
Auction finance is designed for the short-term, usually with a loan term of 1-18 months, although terms of up to 36 months are available.
A regulated bridging loan is one that is regulated by the Financial Conduct Authority in the UK; the Authority upholds financial standards and promotes best practice. When looking for a loan or a financial product ensure your broker is regulated by the Financial Conduct Authority.
Regulated bridging loan terms are restricted to a maximum of 12 months and 75% of equity in a property.
Longer terms are available for unregulated bridging finance, commercial bridging loans and property refurbishment finance. Unregulated loans also provide funding at up to 85% of the equity in a property, and sometimes beyond depending on the circumstances.
What our expert says…
“Auction finance allows you to purchase property or land at auction. It is designed to complete quickly to meet auction conditions.
If you’re looking for funding to complete a property purchase in 28 days or less, auction finance – a type of bridging loan – is the ideal option”
Author: Gary Hemming CeMAP CeFA CeFA CSP
20+ years experience in bridging loans
What interest rates are available for auction finance?
Auction finance is a type of loan that is paid back with a mixture of fees and interest. Interest can be ‘rolled up’ and paid at the end of the term and this is the most common approach to a bridging loan repayment.
Other options are:
- Monthly interest payments, these are a set monthly payment
- Retained interest, this is similar to rolled-up interest, however, the interest amount is deducted from the amount of the loan at the start of the agreement.
Auction finance interest rates range between 0.43-0.85% per month, in most cases.
The lowest rates are usually reserved for lower loan to value (LTV) applications, with loans at 50% or below securing the best terms. LTV is the amount you need to borrow calculated as a percentage of the property’s value.
Auction finance lenders price their applications in relation 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. Residential properties pose less of a risk to a lender as these could be repossessed and sold if a borrower defaulted whereas commercial property or land is potentially more difficult to sell.
You may be eligible for lower rates on large bridging loans over £1,000,000.
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 usually equates to a month of interest.
Broker fees – ABC Finance doesn’t charge a fee for arranging auction bridging finance, however, 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. You will have to pay for the lender’s legal fees, and you may choose to use a solicitor to represent you during the loan process. Read our ABC ‘Do I need a solicitor for a bridging loan?’ blog to understand the pros and cons of self representation as an alternative to expert advice in this area.
How is auction finance repaid?
When using a bridging loan to fund an auction property, you must have a clear exit strategy showing how you will repay the loan. A lender will expect to see a realistic repayment plan within a reasonable timescale and this will form a large part of their funding decision.
Common exit strategies are:
- Refinancing your bridging loan to a longer-term mortgage, for example when purchasing a property at auction that requires improvement work before a mainstream mortgage could be secured against it.
- Sale of a primary, or secondary, property
- Sale of other investments, such as shares
- Inheritance. For example, you may be waiting for the probate process to complete to receive an inheritance. This can be a long and, on occasion, complex process.
What does the auction finance process look like?
Buying a property at auction can feel like a whirlwind in terms of the fast turnaround required. It is still essential to check the market for the best deal as there can be a wide variance between lenders and interest rates.
You can approach lenders individually or use a broker, such as ABC Finance to match you with the right lender for your circumstances. Here we explain the process and how to apply for auction finance step by step:
The enquiry stage:
This is where you investigate options. You can approach lenders individually or use a broker, such as ABC Finance to match you with the right lender for your circumstances. Whichever option you choose, you should not be charged for your initial enquiry. ABC will never charge for an enquiry.
With ABC fill in a simple form, and one of our friendly experts will call you back. During the call we will discuss your needs, your budget, inform you about the options available and give you approximate costs.
During the call you will be given a decision in principle (DIP). This confirms how much a lender is likely to give you.
Loan acceptance:
You select the loan that matches your requirements and the lender is instructed.
Valuation:
This is where the assets you provide as collateral, usually a property, are valued. This process can often be a desktop valuation; for example, a residential property. If however, your property is of significant value or unique then a survey may be required.
Legal process:
The legal process is particularly relevant with a bridging loan, as a legal charge is placed upon your property giving the lender an interest in the property during the loan term. You will need to pay for the lender’s solicitor and you may choose to use your own solicitor. Read our ABC guide on using a solicitor for a bridging loan to understand the pros and cons of getting expert advice.
If you are looking to complete quickly then legal work can be instructed at the same time as the valuation.
Completion:
Funds are transferred directly to you at the final stage of the process.
Repayment:
You repay the loan as outlined in your exit strategy.
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
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:
Understand how to choose the right product – Always look at the overall cost of the loan and also consider hidden fees and penalties for early, or late repayment.
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 is less important when using bridging finance as the loan is secured against property. Nonetheless, downloading your credit report will allow your broker to easily understand your financial past and may help achieve a lower rate.
Speak to an experienced broker – Speak to a finance broker with specific experience of arranging auction finance. 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. ABC Finance has over twenty years of experience arranging specialist finance.
Will I be eligible for auction financing?
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, Limited Liability 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.
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:
- Auctions 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 that are placed on the property in real time.
- A legal pack is produced prior to the auction, meaning you know the legal status of the property before bidding. This is useful during the legal process as fewer checks will be required.
- Properties at auction can be up to 30% cheaper than those bought on the open market.
Frequently asked questions
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?
A specialist broker has access to a wide panel of lenders and can match you with a lender that specialises in auction finance. Using a broker saves you time, money and importantly does not require individual repeated credit applications that may damage your credit file.
Brokers will guide you through the loans process and will understand what paperwork is required taking much of the stress out of 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 key 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?
Funding is available for first time buyers, although buying at auction is inherently risky and care should be taken.
Can you fund development plots?
Yes, we can fund 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 at the Sterling Overnight Index Average (SONIA) rate. The term SONIA reflects the average interest rates banks pay to borrow sterling overnight.
Will I need a valuation report?
Yes, in most cases, a valuation report is needed. Some lenders will lend without a valuation report and this may be the case where a detailed property pack is available. For property purchases in Scotland a property pack must be produced before a house is listed for sale.
A valuation can be based on the auction purchase price or an automated valuation model ‘AVM.’ An AVM is a tool that uses statistical analysis to estimate value; for example the sale prices of similar properties in the area. Whilst an AVM can be useful it is not necessarily accurate in all cases and if a property is unique or has unusual features it is unlikely to be particularly helpful.
Can you get a bridging loan to buy a house if you have bad credit?
Yes, bad credit bridging loans can be used to fund a property purchase in this situation. A poor credit history won’t usually prevent lending, although depending on your exit strategy, it may result in you paying a slightly higher interest rate.
If you would like to know how much you could pay, contact us now and we’ll offer a quote within no more than two hours.
Will I qualify for bridging loans if I’m retired and living on pensions?
Yes, bridging loans are often taken by retired borrowers who are looking to downsize while waiting to sell their old home, especially where speed and cashflow are important factors.
Will I qualify for bridging if I’m self-employed?
Yes, we can offer a bridging loan to self-employed borrowers. Applications from self-employed consumers are common and most lenders will offer loans to this group.
Read our bridging loan guides
Below Market Value Bridging Finance
Bridging Loan To Buy Before Selling
