Auction timescales
At a traditional auction, contracts exchange when the hammer falls. You pay a deposit on the day, commonly 10% of the price, and completion usually follows within 28 days. If you cannot complete, you risk losing the deposit and may be liable for further costs.
The modern method of auction works differently. The winning bidder usually pays a non-refundable reservation fee and has a longer period to exchange and complete. The timescales are more forgiving, but the fee and any buyer's costs need to be factored in.
A standard mortgage is rarely arranged reliably within 28 days, and many auction lots are not mortgageable in their current condition. Bridging lenders can move quickly when the valuation and legal work are ready, which is why they are the usual choice for auction buyers.
Preparing before you bid
The most important work happens before the auction. Once you are bound to complete, there is little room to resolve problems.
- Read the legal pack with your solicitor, including special conditions, buyer's fees and any additional costs added to the price
- Check the title, tenure, lease length and any restrictions that could affect a lender
- Get an indicative comparison so you know the likely loan, rate and fees
- Consider whether a lender can arrange a valuation before the auction, or soon after
- Make sure your deposit and the costs of completion are in place
Some lenders will issue terms in principle before you bid, based on the lot and your circumstances. That gives you a clearer view of the maximum you can sensibly bid and how much of your own money the purchase will need.
Valuation and the purchase price
Bridging lenders lend against the lower of the purchase price and their valuer's opinion of value. Auction prices can exceed what a valuer will support, particularly when bidding is competitive, so it is sensible to set a ceiling that still works if the valuation comes in at the guide price.
Where the price is below market value, some lenders will lend against the valuation rather than the price, which can reduce the cash you need. Others always use the price paid. This difference matters, and we take it into account when comparing lenders.
If the property needs work, a refurbishment bridge can fund part of the works as well as the purchase. We will look at whether a standard bridge or a refurbishment product suits the lot better.
Repaying an auction bridge
The exit is usually a sale after improvement, or a refinance onto a buy-to-let or commercial mortgage. If you plan to refinance, check how long the mortgage lender requires you to own the property, as some have minimum ownership periods, and whether the property will meet their criteria once any works are finished.
Allow a realistic term for the works and the refinance. Building control sign-off, a fresh valuation and the mortgage lender's own legal work all take time, and auction properties often reveal more work once you have the keys.
If you plan to sell, the sale price needs to cover the full balance at the end of the term, including retained or rolled-up interest, fees and selling costs. A margin between the expected proceeds and the redemption figure gives both you and the lender more comfort. Indicative quotes from our panel help you plan, and final terms depend on the valuation, legal pack and each lender's checks.
Property auction finance for different types of lot
Bridging lenders look at each lot on its own merits, and the right product depends on what you are buying:
- Houses and flats in good condition: a standard bridge, often repaid by a buy-to-let mortgage or a sale
- Property that needs work: a light or heavy refurbishment bridge that can include funds for the works
- Commercial and mixed-use lots: a commercial or semi-commercial bridge, where leases and tenants matter as much as the building
- Land, with or without planning: land finance, usually at a lower loan to value
- Lots with short leases or unusual construction: specialist lenders that accept them, which we check before you bid
Our guide to buying at auction with a 28-day completion sets out the timetable, and Instant Quotes gives indicative figures for a bridging loan on an auction property before you bid.
If you or your family will live in the property
If the borrower is an individual or the trustees of a trust, and the property is, or will be, lived in by you or a close family member, the bridge is a regulated mortgage contract with additional protections. We will tell you at the outset if that applies and how your case will be handled, and Instant Quotes shows only products built for regulated bridging when you tell us so.
Your home or property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
