If you need to arrange financing quickly for purchasing an auction property, with the right support, it is possible to access funding within tight timeframes. Here we’ll explain what auction finance is, how it works, examples of UK lenders who offer it and where to find the best rates and terms for your property purchase.
What is auction finance?
It’s a short-term funding solution designed to help buyers complete property purchases quickly, typically within 14 to 28 days after the hammer falls at an auction. It’s most commonly used by property investors, developers, or landlords who need financing faster than a standard mortgage application process would allow.
How does it work?
It functions much like a bridging loan, but it’s tailored specifically for the time pressures and conditions of property auctions. Once the property is secured, the auction finance loan is repaid later by selling the house, refinancing, or taking out a longer-term loan.
The process can be straightforward. Once you’ve identified a property and have an estimated guide price, you can apply for auction finance in principle before the auction date. This way, you can ensure that on the day of the auction, funding is ready to go.
Lending criteria for financing an auction property
Each lender will have its own criteria, but here are some key factors they’ll assess before approving auction property finance:
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Deposit and loan-to-value (LTV): Auction finance typically allows borrowing up to 75% of the property’s value (sometimes higher with a strong application). You’ll usually need to provide the remaining 25% yourself.
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Exit strategy: Lenders place high importance on your exit plan, which is how you’ll eventually repay the loan at the end of the agreed term. Standard exit plans include methods like refinancing with a buy-to-let or commercial mortgage, or selling the property after refurbishing.
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Property type and condition: Most auction finance lenders are open to a wide range of property types, including those deemed “unmortgageable” by high street banks. However, properties with severe structural issues or with specific planning issues may result in additional reviews or lower LTV limits.
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Borrower experience and credit: While first-time buyers can apply, lenders generally favour experienced investors or developers. Bad credit isn’t necessarily a deal-breaker either, but it may limit your choice of lenders or affect the rates on offer.
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Location and value: Properties in stable, high-demand areas are generally easier to finance. Lenders will want detailed valuations and tend to consider local resale or rental potential as part of their risk assessment.
Find out how our brokers helped a client secure finance to buy at auction
How to get auction property finance
Securing auction finance quickly and efficiently can make or break a purchase. To improve your chances of a smooth and successful application, follow these steps:
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Work with a specialist broker: Brokers who understand property auction timescales can connect you with fast-moving lenders who can release funds quickly.
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Get a decision in principle: Your broker can help you get this, even if you end up using a different lender, but it provides a funding framework so you know your limits before the auction.
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Have your paperwork ready: This includes ID, proof of income or assets, property information, and details about your exit plan. Your broker can help advise on the most appropriate exit strategy.
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Apply for finance: Once your broker has matched you with the best lender for your goals, they’ll guide you through the quick application and completion process.
Secure your auction finance with expert guidance today
UK auction finance lenders
Because this is a relatively niche area of financing, the right lender to use will depend on your circumstances, but here are a few examples of UK lenders open to financing an auction property:
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Together: It’s possible to complete in as little as 24 hours, there are no lender legal fees, and you can use desktop valuations.
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Precise Mortgages: Offers auction bridging finance for a minimum of 1 month and a maximum of 12 months (or 18 months for non-regulated mortgage contracts).
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LendInvest: Can provide finance within the usual 28-day property auction timeframe. Terms range up to 12 months, and it may be possible to access up to an 85% LTV.
If you’d like to compare today’s most competitive rates and find a lender that fits your timeline, you can have a free, no-obligation chat with an auction finance broker here.
How do the rates compare to bridging loans?
Auction finance rates are generally similar to bridging loan rates, since both are forms of short-term secured lending. However, auction finance may carry a slightly higher rate due to the speed of completion and perceived added risk.
Why choose Money Helpdesk for your auction finance?
Auction property purchases require precision timing and expert guidance. That’s where we can help. Our specialist brokers understand the unique pressures of auctions and work with a range of lenders who can deliver fast, flexible financing.
Here’s why property purchasers and investors across the UK choose us to help arrange their auction finance:
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Access to specialist niche lenders with exclusive auction finance rates
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Free initial chat with no obligation to proceed further
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Our brokers are 5-star rated on leading review platforms
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Fast-track decisions and tailored guidance from experts
If you’d like to compare the latest rates for free or speak with a broker who has plenty of proven experience arranging financing for an auction property, you can get started here.
FAQs
Yes, an auction finance calculator can be a useful tool to estimate borrowing costs, monthly interest, and repayment timelines. However, while these calculators offer quick estimates, to get accurate figures, it’s best to have a brief discussion with an experienced auction finance broker.