Property Auction Finance

Introduction

Auction finance is built for speed when the hammer falls.

Auction property purchases come with hard deadlines that traditional mortgages simply can’t meet.

Typically a form of bridging, auction finance lets you secure the property first, then refinance or sell when the dust settles.

Compare auction finance below.

How it works

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Lift the lid on the latest rates and receive your personalised results in your inbox.

Step 2

Optimise

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Step 3

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I had such a positive experience working with Abbie, Keira and Jordan. They managed to get my bridging loan application approved and funds released in just 4 days, which honestly made all the difference as I was completing on an auction property. They were incredibly responsive throughout — always quick to reply, keeping me updated, and making what has been a hectic process feel much more calm and manageable. What I appreciated most was how genuinely helpful they were, taking the time to guide me through each step and making sure I felt confident along the way. I’m really grateful for their support and wouldn’t hesitate to recommend them to anyone needing fast and reliable bridging finance!

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What is auction finance?

When buying a property at auction many property investors and developers will use auction finance to help fund the purchase.

Auction finance is also known as bridging finance and is effectively a short-term mortgage secured against the property. Buyers will need to put down a deposit, often 25% of the purchase price.

Auction finance is used as a short-term option to enable buyers to quickly complete on the purchase, before using conventional mortgages to pay back the loan. Alternatively, the buyer may quickly get the property in a saleable condition and sell the property to redeem the loan.

One of the most critical elements of financing a property purchased at auction is speed: good brokers and auction finance lenders can work with you to ensure funds are released in time.

You can compare the costs of auction finance using our price comparison tool, but it would be prudent to do a little more research to check that the auction finance can be secured. Our deal optimiser service will help negotiate interest rates and terms with potential lenders.

The rates shown on our site are the indicative rate ranges that auction finance lenders give out. However, we are able to work with investors to professionally present their project to lenders with the aim of negotiating the best possible deal.

Row of properties on road Curved row of terraced houses on a main roadway with a bus shelter infront.

Why is auction finance a good option?

As an investor you may want to ensure you have sufficient cash available for buying and renovating property; having cash set aside for contingencies; or to take advantage of opportunities that come your way.

Using auction finance can keep you liquid and enable you to buy a property that would not normally get lending against, for example residential properties with no functioning kitchen or bathroom.

When the hammer drops, you enter into a legally binding contract to purchase the property. Properties at auction must be paid within strict timescales, usually 28 days. A mortgage for auction, including the legal process can be completed in a matter of days. Typical mortgages usually take much longer than 4 weeks to complete so you might find yourself in a situation where you need quick short-term finance to bridge the gap. Auction finance lenders are also much more flexible than high street banks and building societies, which means that you can obtain finance despite the property not being in a habitable condition.

Can you get a mortgage on an auction property?

When getting a mortgage to purchase a property at auction the same principles usually apply as when you purchase outside of an auction. Properties purchased at auction are usually snapped up by investors looking for a good deal and this can involve property that needs a fair amount of development.

The amount of work required to the property is likely to have a bearing on the deal offered by lenders. For example, a property that requires structural changes or planning permission might be labelled as a heavy refurbishment. Lenders are still happy to lend on these properties, but you may find the deposit you need to put down may be higher.

A property may need gutting, with new kitchens and bathrooms, stud walls and total redecoration etc. Despite this, lenders may still classify this project as light refurbishment, especially if the project appears profitable. Try to understand the cost of works vs the end value once the works have been completed (the gross development value), as these figures will help you get an offer from a lender.

The amount of experience a property investor has will also help determine how competitive the interest rate is that we negotiate.

How much can I borrow with auction finance?

Our lenders offer loans that range from £50,000 to £15 million. For an investment property purchase the amount you can borrow will not be determined by your income. Instead, lenders will want to be comfortable with the property, know that the project is a profitable one and be happy that you have a clear sensible exit strategy to repay the loan.

Broadly, the larger the deposit you can put down the more competitive the interest rate, and potentially more flexibility from the lender (such as only paying for an automated valuation rather than a survey). Historically, borrowers had to put down at least 25% deposit as most lenders wouldn’t offer loans in excess of 75% LTV (loan-to-value). However, many lenders will now offer a mortgage for auction with a smaller deposit. For equity-rich landlords and investors you may be able to borrow up to 100% of the purchase price by allowing the lender to apply a charge not just against the property you are buying but also against other property too.

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How much does auction finance cost?

As auction finance is a short-term form of finance, costs are generally higher than longer term loans. In addition to a monthly interest rate being charged on the loan, you will also have to pay some fees. The typical fees for auction finance are:

  • 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.

  • Broker fee - This fee is usually between £500 and 1.5% of the loan amount.

  • Lender’s exit fee - some lenders charge an exit fee when auction finance is repaid. If they do, this is usually 1 month’s interest.

  • Valuation fee - In some cases, a physical inspection of the property by a chartered surveyor is needed.

  • Legal fees - 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.

Am I eligible for auction finance?

Auction finance lenders assess eligibility based on the following criteria:

  • Exit strategy – Lenders will want to know how the auction finance will be repaid.

  • Deposit - If you can put down more it’s always better as this will help you to secure a better interest rate. Lenders have minimum deposit requirements of 10-25%.

  • Credit History – As with any loan, good credit is key, but bad credit in this case is only bad if it puts the exit strategy at risk.

  • Property experience – Although you can get auction finance as a first-time buyer, having experience with similar property purchases and a strong track record can boost your eligibility. If you already own property, it can be used as extra security to further increase your creditworthiness.

Auction finance is a type of unregulated borrowing, so this means that lenders have the flexibility to assess applications on a case-by-case basis.

How does auction finance work?

One of the most complicated areas is how auction finance works. That’s why we are here to help cut through the financial jargon and take a look at how auction finance works.

Auction finance is like mortgage lending in some ways, but completely different in others! Here are some of the key points:

  • Auction finance lenders will want you to have an exit strategy.

  • You will usually have to put down a deposit of 10% - 35% of the auction property price. For higher risk property you can expect this to be higher, up to 50%.

  • Auction finance rates are higher than mortgage rates.

  • Some lenders will let you use other property or asset as security.

  • Auction finance is short term – typically 1-24 months.

  • Your income and the property value are less important to the lender… it’s all about that exit plan!

  • Speed is key – you normally get the funds to repay within 14 days.

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What happens if you buy at auction and can't get finance

You know that old saying “You should never take a risk without doing your due diligence first”? Well, we’re going to add a little twist to that: “And you should never take a risk without having your auction finance in place!”

That’s because if you choose to buy at auction without doing your due diligence first, and without having your auction finance in place, it could cost you – in more ways than one. You’ll face legal consequences and financial penalties, which will just make your life harder.

Auction sales are legally binding once the hammer falls, so you'll also be in breach of contract. You'll lose your deposit (or reservation fee) and may face other costs on top.

Of course, we'd advise against taking these undue risks.

Can you buy an auction property before the auction?

It’s a little-known fact that you can buy an auction property before the auction itself.

It’s called “pre-auction,” and it means you can make an offer on a property before the bidding starts.

Most auction houses will welcome pre-auction offers, and if you are really interested in the auction property up for grabs, then a prior offer is a great idea.

Bear in mind that if your offer is accepted, the sale will still go through under auction conditions, meaning you will have to pay the deposit or registration fee immediately. If you don’t pay these, as mentioned before, you will face heavy penalties.

We would therefore recommend doing all your pre auction prep as normal:

  • What is your maximum bid? Auctions are an exciting way to buy property, so if you don’t set this, it’s far too easy to get carried away!

  • Valuation work – this is a great way to see how much you would be prepared to pay for the property.

  • If you are able, go and view the property in person.

  • Do your due diligence – have a solicitor check the legal pack and have a survey done.

  • Make sure your finances are in place.

  • Check the auction terms and legal pack to prepare you for any additional costs.

Once you’ve done all the above, it’s time to contact the auction house with an offer.

To sum up there are three things that you need to do in order to use auction finance successfully: Assess whether this is a viable option for you, do your research about the property and the current market, and be able to pay for the property upfront. These things will help you pull the curtain back on a new world of investing and will allow you to feel in control of your investment by ensuring that you can dictate the terms of your purchase.