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Auction Bridging Loans

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auction bridging loans

Clifton private finance

We specialise in sourcing auction finance on residential and commercial property transactions in the UK

 

 

Bridging Loan Award 2023

Bridging Loan Awards 2022

If you are looking to purchase a property at auction and need finance we can help with an auction bridging loan.

Funding a property at auction can cause considerable problems due to the strict payment deadlines, which can rule out most traditional forms of borrowing, such as a mortgage.

Our specialist auction bridging loan service can help borrowers arrange the necessary finance for an auction property:

  • Finance from £50,000 to £25 million – rates from 0.55%
  • Terms of finance from 3 months to 3 years
  • Fast Finance - 5 to 7 working days possible 
  • With an option to roll up interest payment

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At Clifton Private Finance, we help you find the best loan to finance your auction property – we help through;

  • Comparing rates throughout the market from a variety of lenders.
  • Negotiating with lenders, and guiding borrowers through loan applications.
  • Advising on the best loan option for a customer’s individual needs
  • Organizing valuations while liaising with your solicitor regarding paperwork.
  • Chasing up your application until you see funds delivered to your bank account - as quickly as possible. 

We can source finance from £50,000 to £25m & provide you with a same day quotation.

Our strength as a specialist finance broker is through the relationships we have with private banks, specialist lenders, family offices and wealth managers. We also have access to private investor funds.

Each of these finance sources has their own niche, and through our market knowledge we can deliver enhanced, bespoke or exclusive terms based on your requirements. 

 
Call us on 0117 959 5094 to discuss your requirements.
Recent

Property Finance Deals

Commercial finance for a buy to let portfolio bought at auction - £1.7m deal
Commercial finance for a buy to let portfolio bought at auction
Area
Birmingham
Capital Raised
£1.7m
Bridging Finance For Auction Purchase - Clifton Private Finance
Bridging Finance For Auction Purchase
Area
Kent
Capital Raised
£247K

More Opportunities »

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Auction Bridging Loan Service

Can you get a bridging loan for an auction property?

Yes, getting a bridging loan for an auction property is possible. Bridging loans are a type of short term loan, typically used when financing a property purchase during the in-between stages of selling an existing property or arranging a standard mortgage.

Borrowers often use these loans as a means to “bridge the gap” – when funds are not to hand, but they need to move quicker than traditional borrowing would allow.

When it comes to auction property, the buyer will often need the speed and flexibility bridging loans offer to secure the property within the tight deadline.

What is an auction bridging loan?

Auction bridging loans are designed to be arranged quickly, often within a matter of days, so that the borrower can complete the purchase of the property without delay.

They are usually secured against the value of the property being purchased and can be used to cover the full purchase price alongside associated costs: legal fees, stamp duty, and auction fees, for instance.

Buying a property at auction – within the UK – requires that bidders pay at least 10% of the purchase price upfront when the auction is concluded and they have successfully bid.

Following a successful auction bid, the full payment will be due within 28 days – meaning that a bridge loan serves as a great alternative to the otherwise slow process of traditional borrowing.  

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How do auction bridging loans work?

Auction bridging loans essentially work like any other type of bridge loan. There is a process from application to completion, the important part being repayment, as borrowers must have a sufficient exit strategy in place in order to repay the lender.

Here are the key steps involved in the process:

Application – The borrower applies for an auction bridging loan with a lender. The lender will assess the borrower's financial circumstances and the value of the purchased property to determine whether they are eligible for the loan.

Valuation – A valuation is carried out; this will determine the maximum loan amount that the lender is willing to offer, alongside criteria set by the lender.

Offer – If the borrower is approved for the loan, the lender will make an offer which will outline the loan amount, interest rate, fees, and repayment terms. If the borrower accepts the offer, they will need to provide any necessary documentation and agree to the terms and conditions of the loan.

Completion – Once the loan has been approved, the borrower can use the funds to purchase the property at auction. Typically, funds can be delivered very quickly – within a week, depending on the complexity of the case.

Repayment – As stated, a lender will need to have some assurances before a borrower successfully applies. However, when it comes to repayment, the terms typically span 3 months or more – and due to the short-term nature, interest rates can be more expensive. Borrowers will repay the loan when the term ends through the sale of the property, refinancing through a mortgage, or using funds sourced elsewhere.

Watch our video below about how we helped a client secure a property they'd bought at auction with a bridging loan:

How much deposit do you need for an auction bridging loan?

For the purchase of a property at auction, you’ll have to put down 10% of the price as a deposit – or, alternatively, an asset as security that has equal value.

When it comes to an auction bridge loan, you can offer a lender a certain amount as a deposit – typically a lower amount than a traditional mortgage – yet, the exact amount required to secure a certain LTV (Loan-to-Value) will vary based on the lender.

The amount put down as a deposit for the loan will be deducted, and the borrower will then repay the loan at the end of the term, alongside interest payments and any other applicable fees.

How much will it cost?

The overall cost of an auction bridging loan is subject to numerous factors, including the upfront deposit:

Loan amount – The loan amount will affect the repayment terms, with larger loans requiring higher monthly repayments.

Interest rate – Interest rates for bridging loans generally are higher than traditional mortgages due to the short-term nature of these loans. They present a higher risk, and when it comes to lenders (depending on the loan size) interest rates may be even higher to reflect the potential risk.

Additional fees – including arrangement fees, valuation fees, legal fees etc. These fees can vary depending on the lender and the specific terms of the loan.

So it is essential that borrowers consider costs, and whether short-term finance is the ideal solution – and whether they can sufficiently repay within the deadline.

An expert bridge loan broker can guide you through all your options and determine the best loan path forward.

For an initial idea of cost and repayment, you can use our auction finance calculator below.

Auction finance calculator

Try our bridging loan calculator to get a free indicative quote for how much you can borrow and how much it could cost. 

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What interest rates are associated with auction bridging loans?

Despite higher interest rates than traditional mortgages, there are useful benefits when it comes to repayment - some of which are better suited to a borrower’s circumstances:

Monthly interest payments – this is the standard way to repay interest on a loan, with set monthly payments due throughout the term.

Rolled-up interest – With rolled-up interest, the borrower does not need to make monthly interest payments but will repay the full loan amount plus accrued interest at the end of the loan term.

Retained interest – Retained interest is similar to rolled-up interest, but instead of adding the interest to the loan amount, it is deducted from the loan amount at the outset instead.

We secured £247K in bridging finance for this couple to buy a Grade II-listed farmhouse in Kent at auction – which they planned to subdivide into a holiday home and a home for themselves. Finance was secured in time to complete post-auction payment, with the eventual sale of their current home as the agreed exit. Read more »

Types of property you can buy

Auction bridging loans are used to finance several property types, or assets, including:

Additionally, alternative assets can be considered when it comes to an auction bridging loan such as fine art or classic cars.

Can I get 100% LTV auction finance?

With auction finance, you can get an LTV of up to 80% - though it can be higher with additional securities alongside the primary property the loan will be secured against.

It is, however, unlikely that you will be able to get 100% LTV financing for an auction property, due to the requirement of a deposit, and a certain amount of the loan needed to be paid upfront.

Need a bridging loan for an auction property?

If you are looking to purchase a property at auction and need finance we can help.

We can source finance from £50,000 to £25m & provide you with a same day quotation.

Our strength as a specialist finance broker is our relationships with private banks, specialist lenders, family offices and wealth managers. We also have access to private investor funds.

Each of these finance sources has its own niche, and through our market knowledge, we can deliver enhanced, bespoke or exclusive terms based on your requirements.

We pride ourselves on delivering a cost-effective, individual and highly professional mortgage broker service. Call us now to arrange a first discussion of your situation:

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