Auction Bridging Finance
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Auction Bridging Finance
What is auction bridging finance and how does it work?
Auction bridging finance describes a range of borrowing options that allow people to buy a property at auction. It might be helpful if I explain how auctions work.
They’re an alternative way to buy and sell property, without using an estate agent or doing a private sale. They are ideal for selling quickly, and there are various reasons why people buy at auction.
The big draw is the opportunity to pick up property at a better price. You’ll often see distressed properties, that are run down or have something wrong with them, and you can get a good deal on them.
Another huge benefit for buyers and sellers is speed. With a lot of auction houses, it used to be just four weeks from an offer being accepted to completing the purchase. A lot of auction houses now extend that to eight weeks, giving you a bit more time so it’s less stressful.
Often people selling their property with an estate agent find that the process can drag on for months – even over a year. That’s frustrating for all parties. At auction, you put your bid in and if you win, you’re effectively exchanging contracts – you’re committing a 10% deposit to that purchase.
If you don’t complete in the timeframes agreed – either four or eight weeks, you would lose your deposit. The auctioneers just re-market the property. So you really need to have all your ducks in a row, and that’s where we come in, to help with the finance.
Can I just use a standard mortgage at auction?
Using a standard mortgage is an issue. A lot of standard mortgage lenders take longer than eight weeks, believe it or not. You’ve got no chance on a four week deal with a standard mortgage. You’re probably looking at 10 to 12 weeks on average. An auction house won’t let you off – they stick to those timescales.
Many properties or lots, as they call them at an auction, are not typical family homes. They could be houses in disrepair, old barns, farms, pieces of land, semi-commercial property or anything else you can think of.
Standard mortgage companies normally just lend on a property that’s habitable. But these properties may not have a functioning kitchen or bathroom, and you can’t get a normal mortgage on them anyway.
You need auction finance, because auction bridging lenders actually account for that. They’ll let you buy the property, do the work to get it to a good condition and then you can either sell – sometimes called flipping – or refinance it to a normal mortgage once it’s habitable.
We help clients get a bridging loan for these types of properties, including funding the repairs and renovations. You get the money to buy the property, plus 100% of the cost of the work.* Once the work’s done and it’s made habitable you can either sell it or refinance it to a normal mortgage. Normal bridging loans can be used for property purchase at auction but some lenders have gone further and launched auction bridging finance.
*Bridging loans arranged via referral to our sister firm, Brunel Bridging
How is auction finance different from a standard bridging loan?
The key is speed. That’s what changes in their policy. The lender tries to get it through really quickly because of that four or eight week deadline. They’ll do automated valuations, where a surveyor doesn’t actually go out to the property and streamline internal processes to make it really quick for this product.
On the legal side, normally one of the slowest things in any purchase, they allow a solicitor to take an indemnity policy instead of doing full searches. Those take a long time, because you’re relying on local authorities to send details back.
Can Mortgage Style help me with all types of lending?
Our advisors here at Mortgage Style are very experienced with all this kind of lending – bridging, development, finance and commercial.
But for properties that would need bridging and development finance, we use our sister company, Brunel Bridging. It’s the same staff and we work in the same building, it’s just a different legal entity. We’re all part of Mortgage Style.
How does auction bridging finance work?
Auction bridging finance works like any other bridging deal. You borrow money against the value of the property, or you can secure the lending against other properties you own.
You could actually borrow 100% of the property value – or even more if you’ve got security in other properties. A great benefit of bridging in general is that there are no monthly payments, and most of the fees can be added to the loan. They’re all rolled up and you clear those at the end, when you either sell the property or refinance it.
You need to know when the purchase has to complete from the start, because everything’s got to be aligned. The solicitors need to be aware of the correct timescales. That’s really important.
Lenders will want to know how much deposit you have and you’ll need to get a solicitor to review the legal pack. Things in there could cause problems down the line. The lender will also want to know your plans for the property and how you’re going to repay the loan at the end. That’s the really key thing with bridging lenders.
You might say you’re going to renovate this property to make it worth a certain amount, and then sell it. They’re going to query and check that. They’ll have internal staff and a surveyor looking at the property and assessing whether that’s viable. These checks are all done when you’re putting your application in.
What are the eligibility criteria for auction bridging finance?
As a general rule, bridging lenders are most concerned that the property you’re buying is worth what you’re paying for it, because that’s their security. They want to know there’s a clear exit to get their money back – whether that’s via selling the property or refinancing it.
There’s a lot less emphasis on you as the borrower than with a standard mortgage. If you’ve ever done a mortgage application, you’ll know they ask for all the details of your income, your debts, your inside leg measurement… a lot of information.
With bridging, it’s not so much about that. We help clients all the time who aren’t working and have no regular income. It’s not a problem. With bridging you’re not actually making any monthly repayments so you don’t need to prove what you earn.
It could come into play if you’re refinancing with a mortgage, as that requires an income. Some lenders also have specific rules on the types of property they will or won’t lend on. For example, some won’t lend on care homes. But as your broker, it’s our job to understand what you’re buying, your plans and how you’re going to exit the loan.
The earlier we can get involved in the process, the better. We always ask clients to send us the details of the property as soon as they’re interested in something, because we could spot an issue straight away that could cause problems down the line. That saves you time, and more importantly, money.
What are the interest rates for auction bridging finance?
Interest rates do vary all the time, as with normal mortgages. Speak to us and we’ll give you a snapshot of rates at that particular moment in time.
As we speak today on the 4th of April 2025, they range between 0.55% to 1.5% per month. The main factor is how risky the property is deemed to be, and how much experience you have.
You’ve got no monthly payments. All the interest is rolled up and most of the fees are too. Most lenders charge a 2% arrangement fee, although we have a few options lower than that. We can see if you qualify for those deals.
As a specialist broker working with many bridging lenders, we also have access to some exclusive rates that clients can’t access directly. And because we’ve been running for 18 years, some deals are available to us and not even other brokers.
So it’s really important to speak to us. Even if you’ve been offered something by another broker, let us have a look and see if we agree it’s the right option.
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How is the loan amount decided for auction bridging finance?
Lenders have their own lending limits, depending who they are and how they view the risk. These can vary between 60% of the property value right up to 85%. Certain situations can affect the loan amount offered. For example, if a property type is considered to be riskier, the maximum loan amount may be reduced.
The loan amount also affects the rate you can get. The best rates come when you’re borrowing less against the value of the property, but it’s possible to borrow 100% of the purchase price, or even more if you’ve got additional security in other properties.
What is the repayment period for auction bridging finance?
It’s different in every scenario. With regulated bridging loans, which is bridging finance arranged for a property the client will live in, it needs to be repaid within 12 months.
But if you’re not going to live in the property you can have longer, as this is an unregulated loan. Commonly, it’s 18 months, but you can actually go up to 24 months.
There are even some hybrid products out there, allowing a loan for up to three years. These are not traditional bridging, but we can discuss those with you if you do need that longer term, for whatever reason.
Also, if a client is not in a position to pay the bridging loan off at the end of the term, it might be possible for us to do a new bridging loan for them. It’s termed as ‘bridging a bridge’. It’s not an ideal scenario, because you’re going to incur extra expenses in setting up a new product, but it’s a solution if you’ve overrun due to unforeseen circumstances. There are ways to cope with that.
Are there any additional fees associated with auction bridging finance to know about?
You’ve got the usual arrangement fees, which are normally 2% across the board, but some deals come around with a deduction off that.
In addition to that, you will have solicitors’ fees. These are more expensive on a bridging loan than a standard mortgage as the solicitor has to get more involved. Again, you’re wanting to do this quickly, and they charge more for that.
If you’re applying for refurbishment finance as well as the money to buy the property, they give you the purchase cost, and then you are funded in stages to cover the works. The lender may get a quantity surveyor to oversee that, which you pay for. That’s generally if it’s more in-depth, heavy work.
The other option is to have an asset manager, usually an internal staff member, who does the assessments. They’ll look at the property, check the works you’ve done, make sure you’ve spent what you said you would, and then sign it off to release the next tranche of money.
We charge a broker fee for bridging and mortgages. It varies depending on the complexity of the case. Generally speaking, it’s £595 for a bridging loan, but we could save you ten times that – so it’s well worth the value.
Finally, you need to pay for a survey or valuation on the property. The lender normally goes to their panel of surveyors, they’ll come back with three options with costs, and you choose which one to go with.
You might not go for the cheapest because some surveyor firms are really busy. They might not be able to get a report back to you for three weeks, which doesn’t work for auction timescales. You might prefer one that’s slightly more expensive, but can do it in a week.
What happens if I need to extend the loan term for auction bridging finance?
You can do it, but hopefully you won’t need to. Part of our process at the start is to work out how long you will need this finance. But unforeseen things do happen and can affect the time it takes to do a project.
Some lenders are more flexible than others. A few will charge you for an extension, perhaps setting a higher interest rate for the extra time. Others might charge a one-off fee to extend that loan term.
It’s worth staying in touch with your broker, whether that’s us or someone else. If there are any issues, you don’t want to be dealing with this at the last minute. We can speak to the lender about extending the term. If that’s not an option, we can look at other lenders to get you out of the bridging loan that way.
What are the risks involved in auction bridging finance?
The biggest risk is that if you don’t complete on time within the four or eight weeks, you’re liable for that 10% deposit. Perhaps you haven’t got everything approved and the money isn’t ready to go to your solicitor to pay the sellers.
To avoid this, it’s really important to get a solicitor involved as early as possible. They need to check the legal pack at the start and get everything lined up as soon as possible.
It’s key to find a solicitor with experience in bridging finance. In the past, we’ve seen things go slightly wrong where a solicitor wasn’t used to dealing with bridging finance. They normally worked with longer timescales.
We can recommend solicitors with lots of experience in this, or you could find someone yourself. It’s totally up to you. If timescales are tight, we can approach certain lenders that specialise in super fast bridging. We’ve seen cases complete in a matter of days, not weeks.
Can auction bridging finance be used for non-residential properties?
Yes, you can use auction bridging finance for any kind of property purchase. It doesn’t have to be a house or a flat. We’ve seen some weird and wonderful things – a church, a nightclub… we’ve recently done one for a quarry, or land where the land doesn’t even have planning.
We can get funding on land with or without planning permission. We can help with pretty much anything, really.
Is auction bridging finance available for properties outside of the UK?
Bridging lenders in the UK can only take security for a loan over a property in the UK. If you are investing abroad, there might be another way around it. If you’ve got properties here we can raise funds on those to effectively give you the cash to buy abroad. For overseas finance, generally, you’re going to need a specialist broker.
How long does it typically take to get approval for auction bridging finance?
It can be really quick, if you need it to be. If we knew from the start you needed it fast, we’d go to certain lenders for that.
There are various factors that dictate how quickly it can be done. Getting an Agreement in Principle – called indicative terms in the bridging world – can be done in a few minutes. With most lenders you will get it back the same day, unless you give it to them at one minute to five.
We work with leading technology firm Brickflow to help clients quickly find out whether their property investment application is likely to be successful. We can even give our clients access to that, to play around with numbers. You can tap in the purchase price, the cost of the work and it fires back options. There’s a link to this tool on our website.
Can I use auction bridging finance if I already have a mortgage on another property?
Yes, absolutely. Auction bridging finance is more focused on the property you’re buying. The fact that you have other mortgages or debts shouldn’t affect anything, as long as you pay them on time, of course.
Are there any restrictions on how auction bridging finance funds can be used?
No, not really. The only stipulation is that whatever you do with the money, it’s got to be legal.
What happens if I fail to repay auction bridging finance on time?
Not repaying auction bridging finance on time would mean you incur financial penalties. Ultimately, this could result in the lender repossessing the property the loan is secured on.
Usually, though, the lender would just increase your monthly interest rate and possibly charge a one-off default fee. The lenders really don’t want to repossess, so normally they’ll talk to you to find a resolution.
If you are struggling, it’s best to speak to us and the lender and get it resolved as early as possible. But it’s our job to make sure that this doesn’t happen. We’ll work with you to find alternative options.
If we can’t negotiate a longer deal with your current lender, we’ll look at the whole market and find another lender who will re-bridge your bridge. It’s difficult, because property development isn’t an exact science. Things can affect the speed of the project: the weather, supply of materials, labour… It can all have a big impact. But if we communicate well and know what’s happening, we can advise you correctly.
What else do we need to know about auction bridging finance?
I would just emphasise that if you are looking to buy property at auction, speak to us at the earliest opportunity. We can identify any potential issues with that purchase. The last thing we want is for you to be committing yourself, your time and your money to something that just won’t go anywhere.
There may be a fee for mortgage advice. The precise amount of the fee will depend on your circumstances and will be discussed and agreed with you at the earliest opportunity. Typically, in most cases, our fee will be £495. We charge £595 for bridging and adverse credit cases; and £995 for Later Life Lending.
Mortgage Style Ltd is registered in England and Wales. Registered Number 5743648.
Registered Office: Elm Tree Farm Estate, The Sheepway, Portbury, Bristol, BS20 7TF.
Mortgage Style Ltd, trading as Mortgage Style, is an appointed representative of the H L Partnership Limited, which is authorised and regulated by the Financial Conduct Authority.
YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP TO DATE WITH YOUR MORTGAGE REPAYMENTS.
SOME BRIDGING FINANCE IS NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
Bridging loans arranged via referral to our sister firm, Brunel Bridging