What is a bridging loan for an auction property?
A bridging loan for an auction property is a type of fast bridging loan that is used to fund auction purchases.
They are a type of short-term property finance that can complete well within the 28 days required for auction conditions, making them a popular option for property investors and homeowners alike.
Bridging is a temporary option that is used to complete the purchase. Once the property is purchased, you are able to refurbish it or refinance it to the lender of your choice.
Read more – Auction finance calculator or Property refurbishment loan calculator.
Key Criteria
Max LTV
Up to 90%
Interest rate
From 0.35% per month
Charge types
1st, 2nd & 3rd considered
Term
1-36 months (maximum 12 months for regulated lending)
Interest type
Added to the loan, deducted or serviced
Completion timescale
2 days – 3 weeks
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) – access to non-status lending with no credit checks
We assess all bridging applications on an individual basis
Bridging Loans for Property Auctions: Complete in 28 Days
When purchasing a property at auction, speed is of the essence, as in most cases, you must complete your purchase within 28 days of the auction.
For this reason, many borrowers choose to take a bridging loan for an auction property purchase, instead of a traditional mortgage.
Whether you’re looking for a house in need of renovation, an investment property to flip or even land that you want to secure planning on, bridging finance could help.
We have a range of products tailored to fund auction purchases quickly, allowing you to bid with confidence with market leading rates, starting at 0.35% per month!
Timeline for Auction Finance
When bidding on a property at auction, it’s important that you understand the timeline for auction finance, and how that ties in to the timeline for property auction purchases.
- Pre-auction – Talk to a broker and get an agreement in principle to ensure that you can complete a potential purchase before bidding. Either get a solicitor from your broker, or find a local firm with experience of completing under auction conditions, explicitly confirming that they can complete within 28 days.
- When the hammer drops – Let your lender or broker know that you’d like to proceed and the purchase price that you have agreed.
- Within 1 day – Ensure that your application has been submitted to the lender and ensure that the valuation is a priority. It is best practice to also instruct legals at this point to ensure you’re ready to complete within 28 days.
- Within 7 days – Your application should be progressing well and where required, the valuation should have taken place by now, even if the report is not quite back with the lender.
- Within 10 days – The valuation should be back by this point and the offer should either be released or about to be released. Your solicitor will be advancing with their work, as they will have the auction legal pack to streamline the legal process. Where you plan to refinance as an exit, this should be lined up with an agreement in principle as a minimum.
- Post 14 days – The formal offer should be issued by now and the majority of the work by now will be between yourself and your solicitor, or the solicitor and their counterpart acting for the lender.
- Days 15 to 28 – Things should be well advanced by now and the final steps should be focussed on ticking off the final issues, arranging for documents to be signed and witnessed, requesting funds and setting a completion date.
- Before day 28 – Completion takes place and the property is yours!
Pre-Auction Agreement in Principle
When bidding at auction, it’s important to understand that the winning bidder is legally obliged to complete through exchange of contracts and must put down a 10% deposit on exchange.
This means that your 10% is at risk should you fail to complete within the deadline, usually 28 days.
For this reason, it’s important to minimise the risk by securing an agreement in principle BEFORE the auction. This will ensure that you have the best possible chance of completing and will keep your funds safe.
Get in touch with our expert team now and secure a market leading quote and full agreement in principle in 1 hour.
Why do I need to take bridging finance instead of a mortgage?
As mentioned above, bridging finance is used for auction purchases due to the fact that the purchase must be completed quickly, but that isn’t the only reason.
Here are some other key reasons to consider a bridge:
- The property is unmortgageable – If the property is currently unmortgageable, for example, is does not have a kitchen or bathroom, interim finance will be required.
- You’re planning to renovate it – If you’re planning to renovate or extend the property, you’ll need suitable property refurbishment finance, rather than a mortgage.
- You’ll be taking it through planning – If you need to secure planning permission on the new property before completing works, this will not be popular with a mortgage lender. In this scenario, a short-term bridging loan makes total sense.
- You’re buying before your current property sells – If you’re buying a new property before selling your existing one, you may not meet the affordability requirements for a mortgage until your sale completes.
- You plan to flip the property – If you’re planning to flip the property within a fairly short timescale, short-term finance allows is all you need. A mortgage, most likely with early repayment charges would be clunky, slow you down and is a poor fit for your needs.
Read more – Bridging loans for flipping houses or Bridging loan for an MUFB.
Will I qualify?
If you’re purchasing at auction, have a suitable exit strategy and sufficient deposit then you have a great chance of qualifying.
The easiest way to make sure is to get in touch with us, and we will assess your application and provide a written approval in principle within 1 hour.
How much will it cost?
The main cost of a bridging loan for an auction property is the bridging loan rates and fees charged.
Interest rates start at 0.39%, with rates of 0.55-0.8% being common.
Generally, applications at a lower LTV will achieve lower interest rates.
How quickly can I get the money?
We can complete bridging loans within a few days for urgent cases, although the average application takes anything from 1-3 weeks to complete.
For auction purchases, we naturally select only the quickest and most reliable lenders to ensure that the deposit you put down when the hammer drops remains safe.
Can I get my application approved before the auction?
Yes, we always look to get your application approved before the auction to ensure that you keep the risk of failing to complete to a minimum.
Before the auction, we give you a written bridging loan approval in principle and can guide you on the details of safely bidding including working out a maximum price that you could consider paying.
Auction bridging finance FAQs
How much can I borrow?
We can offer bridging loans from £10,000 with no maximum loan size.
We offer specialist £1m+ bridging finance deals at low rates.
Loan to value will be a key factor in your maximum funding level. We can offer up to 90% for refurbishment projects, or 75% where there will be no value added.
Can I take out bridging auction finance without putting down a deposit?
Yes, we can fund a purchase without a deposit, if you can offer another property as additional security.
You will still need to fit within the maximum loan to value limit, split across both properties. These loans are called 100% bridging loans.
Will I qualify with bad credit?
Yes, we offer a range of bad credit bridging loan products for borrowers with missed payments, defaults, CCJs, mortgage arrears, IVA or bankruptcy.
When should I apply for finance?
It is best to get your application approved in principle before the day of the auction, ideally at least a few days before.
This will give you plenty of time to make sure your funding is secure and ready to go.
