What is auction finance?
Auction finance is a bridging loan used to complete a property bought at auction. It exists because auction deadlines are usually too short for a standard mortgage; for the wider picture, see our guide to bridging loans for property investors.
How long do you have to complete after an auction?
At a traditional auction, usually 28 days. Rightmove explains that contracts exchange on the fall of the hammer, a deposit of normally 10% is paid straight away, and the 90% balance is due within 28 days — and if you can't complete, you lose the deposit.
Modern method (conditional) auctions give more time. Homeward Legal describes a reservation fee of typically around 5%, then 28 days to exchange and a further 28 to complete — 56 days in all.
| Traditional auction | Modern method auction | |
|---|---|---|
| When you're committed | Fall of the hammer | On paying the reservation fee |
| Paid on the day | Deposit, normally 10% | Reservation fee, typically ~5% |
| Time to complete | Usually 28 days | About 56 days in total |
Sources: Rightmove, Homeward Legal. Always read the auctioneer's own conditions — they decide the actual timetable.
What should you have in place before you bid?
Homeward Legal's advice is blunt: all finance must be in place before you bid. In practice that means a lender who has seen the lot and your exit, plus a solicitor who has read the legal pack. Things a lender will want to know:
- The lot, the guide price and your maximum bid.
- Your deposit and where it comes from.
- The exit — sale, or refinancing onto a buy-to-let mortgage after the works.
- Whether the property needs work first; if so, see refurbishment bridging.
Why are auction properties often bought with bridging?
Mainly the deadline. Bridging lenders build for it: Shawbrook, for example, lists buying at auction and refurbishing among the uses of its bridging loans. The bridge is then repaid by a sale or by refinancing onto a longer-term mortgage — your exit.
What does auction finance cost?
The same as other bridging: a monthly interest rate plus fees. Model it with the bridging loan calculator and compare published lender rates in our rates guide.
Is bridging right for you?
Bridging is short-term borrowing secured on property, and the lender can take that property if the loan isn't repaid. Only use it with a realistic exit, and compare it with a standard buy-to-let or commercial mortgage first — if you have time to wait for one, it usually costs less. Speak to your accountant or solicitor if you're unsure.