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How to Get Finance for an Auction Property

Need a bridging loan to buy property at auction? Get the right advice here.

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 26, 2021

When buying a property at auction timing is of the essence, and long-term forms of borrowing like mortgages are tough to arrange ahead of tight deadlines.

This is where auction financing can help you out, as these short-term loans can be quick to arrange and flexible enough to meet the need of anyone who’s purchasing under the hammer.

What is auction finance?

Auction finance is simply another term for a bridging loan, when this form of borrowing is used to purchase a property at such an event.  Property auction bridging loans are offered on a short-term, interest-only basis and can be super-fast to arrange.

It is possible to have a conditional offer on the table within days of the initial application, subject to a valuation being conducted on the property you’re buying.

Property auction financing, like any other type of bridging loan, typically comes with a high-interest rate compared to other forms of borrowing, such as mortgages and homeowner loans, but the lending criteria can be more flexible.

How does auction finance work?

It is not a requirement to have all your finance sorted and in place before you bid for a property at an auction. In reality, all you need is at least 10% of the final purchase price ready to handover once the hammer falls.

That 10% will serve as your deposit and paying it on the day is a requirement as part of the auction bid. The remainder of the full balance will then be due within 28 days, which may not be enough time to arrange a standard mortgage or homeowner loan.

If you’re unable to arrange finance in this timescale you could lose your 10% deposit. This is where a bridging loan for auction properties comes into its own, as securing one quickly enough to meet this deadline is realistic, providing you’re eligible.

Most providers’ lending criteria hinges on the exit strategy, i.e. how you will repay the house auction loan at the end of the term, and this would usually be via the sale of the property or a remortgage.

Is bidding at auction without loan approval risky?

It can be, so be sure to seek specialist advice from the experts we work with before doing so, but if you have 10% of the property’s purchase price to put down on the day, 28 days may be enough time to take out a bridging loan to fund the rest of the transaction.

The risk is in losing your 10%, so it’s best to get an approval upfront!

How quickly do property auction loans have to be repaid?

Most bridging loans are offered on a short-term basis and must be repaid within 12 months or less. Longer terms are available, as some providers will stretch to 18-24 months, but the lengthiest you’re likely to find is 36 months.

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How is interest calculated on a short term auction loan?

Like with any bridging loan, the lender will charge you interest in one of three ways…

  • Monthly:
    You make interest payments each month and the full loan amount is due at the end of the term
  • Rolled up:
    The monthly interest charges are tallied up and added to the loan amount at the end of the term. The cumulative total is payable in full at the end
  • Retained:
    The lender calculates how much you will owe at the beginning of the term by adding the monthly interest payments to the loan amount.
    You essentially ‘borrow’ the interest, usually for a set period, and pay everything at the end

If you’d like to find out more about how auction finance works, get in touch and we can arrange for an expert in this specific area of lending to contact you and discuss further.

How much deposit do I need for an auction loan?

Auction finance is usually capped to a loan to value (LTV) ratio between 70-75% for the most straightforward cases, which means you’ll need a deposit of at least 30-35% of the property’s value since the interest is also factored in.

For higher-risk deals, the LTV can drop to anywhere between 50% and 60%, (what is classed as risky will vary from lender to lender).

As a general rule, though, if there is any doubt surrounding your exit strategy paying out, your application may be deemed too risky. This is why having a clear exit strategy from the start is so essential.

Higher LTV agreements do exist – it’s possible to get up to 100%, though this usually means securing the loan against additional properties or assets you already own.

Most lenders are happy with multiple securities but may expect you to pay valuation fees for each.

What types of auction property can I buy with auction finance?

When using bridge finance to buy at auction, there are few restrictions on the property type you’re able to purchase.

Auction-goers often use auction loan financing to purchase residentialcommercial and mixed-use properties, as well as ‘unmortgageable’ buildings.

Residential properties

It is possible to use a bridging loan on your home to buy an auction property that you’re planning to live in afterwards. For this, you would need to find a regulated bridging provider.

Borrowers occasionally go down this route because obtaining a mortgage for an auction property can take longer than getting a bridging loan. Once you’ve used the loan funds to secure the property, the exit strategy would be a residential remortgage.

If you need finance for buying a property at auction, get in touch. The advisors we work with are whole of market and can connect you with the one offering the most favourable rates to somebody in your circumstances.


A number of bridging finance providers are willing to lend to borrowers in the market for commercial property under the hammer. However, there are lenders who place restrictions on certain types of commercial property, such as restaurants and petrol stations, due to the perceived higher risk.

Some will cap LTV at 50-60% and others won’t lend at all.

That said, with whole-of-market access, it shouldn’t be difficult to find a bridging provider who lends for commercial properties, and if the deal is straightforward, the interest rates and LTV are generally the same as for residential properties (70-75%).

For any property with a commercial element, including mixed-use, the lender might ask to see a business plan to assess the viability of the investment.

Unmortgageable/uninhabitable properties

Some properties that go under the hammer are fixer-uppers which need serious renovation work. Even with all of the time in the world, some providers wouldn’t be willing to offer you a mortgage on a property they consider uninhabitable, but bridging loans are different.

If you can convince the bridging lender that you’re capable of bringing a dilapidated building back into a mortgageable state, they might be willing to provide you with funding for the works. The exit strategy would either be a remortgage on the revamped property or its sale.

In order to prove to the lender that you’ll pull off your development plans, it might help if you can evidence past experience in property and convince them that setbacks are unlikely.

If you’d like to find out more about the different types of property you can use auction finance for give us a call on 0808 189 2301 or make an enquiry and we will arrange for an expert to get in touch.

What to look for in an auction finance broker

The first thing to take into account here is whether you need a regulated or unregulated auction finance company.

If you need a bridging loan secured on a residential property that you’re planning to eventually live in a regulated bridging lender is what you need.


Regulated bridging loans are regulated by the Financial Conduct Authority (FCA), giving borrowers extra protection against bad advice and mis-selling.


If you’re looking for an investment property / to secure finance on a property you or your family don’t live in, then an unregulated bridging provider is the way to go.

Unregulated lenders have the right expertise to deal with investment borrowers and are more flexible, enabling them to offer you a bespoke agreement.

For example, if it’s a buy to let property you’re after, an unregulated lender may allow you to borrow based on rental potential, rather than you salary, which may be lower.

The advisors we work will have access to every regulated and unregulated auction loan provider in the market, and if you make an enquiry, they will connect you to the provider who is best equipped to offer you a favourable auction financing deal.

Getting the best interest rates

All bridging finance applications are assessed on a case-by-case basis but providers usually reserve their most favourable rates for borrowers with the following…

  • A strong exit strategy:
    The more likely your exit strategy is to pay out, the more likely you are to be offered an attractive deal. When buying a property at auction, the exit strategy will usually be a remortgage or a sale, so having an offer on the table or an agreement in principle usually helps. If the project involves development work, the lender will be keen for you to evidence that your plans are achievable.
  • Clean credit:
    Although bridging lenders can be flexible, some might not be if you have credit issues which may put your exit strategy in jeopardy. If the exit is a remortgage, some lenders will be cautious of adverse credit borrowers and underwriters might be concerned about further adverse building up over the term. While credit issues that have no bearing on the exit won’t be an issue for some lenders, a clean file will always go in your favour when it comes to rates.
  • Experience in property:
    Property experience isn’t essential to all bridging lenders, but it may help you convince your provider that you’re capable of pulling off your plans. Some lenders may even insist on it if it’s a complex development project.
  • A healthy deposit:
    Although you can get a bridging loan with a deposit of 25% (higher if it’s a risky deal in the lender’s eyes), more favourable rates may kick in if you’re able to put down more – 40% or higher is a good, solid, figure.
  • A good security property:
    Those seeking short term auction finance for a property purchase are more likely to end up on the best interest rates if they secure the loan against a good, sellable property. The lender will be keen to see that the property will raise the required amount at the end of term, and that there are no factors which might deter potential buyers, such as non-standard construction and leaseholds.

If you’d like to speak with someone about finding the best mortgage rates for the auction finance you require, give us a call on 0808 189 2301 or get in touch. The advisors we work with have access to the whole market and will be able to help you find a deal that best suits your requirements.

Speak to an auction finance expert

So, you’ve got your eye on an auction property and have decided you’ll be tabling a bid. It’s time to secure some capital to make sure you can foot the bill when payment is due.

The best way to go about this is to speak with a whole-of-market auction finance expert, like the ones we work with. Not only can they tell you how to get finance for an auction property, they can connect you with the lender offering the best deals on loans for auctions.

For further information about how to finance buying a property at auction and finding the right broker, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry.


Are there auction finance loans for Limited Company borrowers?

Yes, if you’re a Limited Company borrower wanting financing for an auction property, there may be a bridging loan for you. Many auction finance providers cater for Ltd Companies and the interest rates they offer them are usually no different. Ltd Company bridging applications are often treated similarly to Limited Company buy to let applications, so the lender may expect a personal guarantee from each of the company directors before releasing the funds.

Can I use bridging finance to buy at a repossession auction?

As long as the asset/property you’re bidding for can provide an exit strategy (or you have another viable exit strategy in place), there’s no reason you can’t use bridge finance to buy a property at a repossession auction. Technically speaking, bridging loans can be used for any legal purpose.

Can I use a bridge loan to purchase a vehicle at an auto auction?

Broadly speaking, there’s no reason why a bridging loan cannot serve as auto auction financing, as long as you can evidence an exit strategy and convince the lender the deal is worth their while. As previously mentioned, bridge loans can be used for any legal purpose and unregulated lenders have the flexibility to provide them in all kinds of circumstances.

The loans we are discussing in this article would need to be secured on a property of course, not the car itself. If you want car finance for an auction purchase this may either be best placed with an unsecured loan, or perhaps an asset finance deal (if the car is valuable). Be sure to speak to an advisor to weigh up all options before pressing ahead.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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