Bridging Loans for Auction Purchases

Winning a property at auction usually means completing within 28 days, and often within 20. That is far too fast for a standard mortgage. A bridging loan is built for exactly this situation: fast, short term, property secured finance that lets you meet the auction deadline without losing your deposit or the property. Sadi's Commercial Finance is an NACFB and FIBA registered commercial finance brokerage and arranges auction bridging finance with lenders who can genuinely move at pace.

Who it is for: buyers who have won a lot at auction, investors bidding on multiple properties, developers buying refurbishment stock, and anyone facing a tight completion deadline after exchange.

Why auction purchases need bridging finance

An auction contract is legally binding on the fall of the hammer, with completion typically required within 28 days
Standard mortgages rarely complete in that time, and a broken chain is not an excuse the auction house will accept
Many auction lots are unmortgageable as they stand, whether through condition, a short lease, non standard construction, no kitchen or bathroom, or a title defect
Modern method of auction lots often move even faster, with a reservation period rather than a full 28 days
If you fail to complete, you normally forfeit the deposit and can be pursued for the shortfall if the property is resold for less

What we arrange for auction buyers

Regulated and unregulated bridging secured against the property being bought, another property you own, or both
Refurbishment bridging where works are needed before the property will qualify for a mortgage
Second charge bridging to release equity from a property that already has a mortgage on it
Pre approval before you bid, so you go into the room knowing what you can realistically fund
Exit finance, arranging the buy to let or commercial mortgage that repays the bridge

How the process works

Talk to us before the auction. Send us the lot, the legal pack and your rough maximum bid. We respond the same working day.
Agree the structure and the exit. We confirm how much can be raised, against which security, and how the loan will be repaid. The exit is what gets a bridge approved quickly.
Get terms in principle. You bid knowing a lender is behind you rather than hoping to arrange finance afterwards.
Instruct on the fall of the hammer. We move the case to the lender immediately, and the valuation is instructed the same day where possible.
Legals run in parallel. Using a solicitor experienced in bridging is the single biggest thing you control that affects speed.
Complete and plan the exit. Funds are released to complete, and we start work on the refinance or sale that repays the bridge.

What lenders assess

Bridging lenders are security led rather than income led, so the questions are different from a mortgage application. They look at the value of the property and the loan to value, the credibility and timing of your exit, your experience with similar projects, the legal title and anything in the legal pack that could delay completion, and where refurbishment is involved, the scope and cost of works and the expected value afterwards.

Personal income matters far less than it would for a mortgage. What matters most is whether the exit is realistic. A sale in a slow market with no agent instructed is a weak exit. An agreed refinance with a lender who has already indicated appetite is a strong one.

What it costs

Bridging is priced monthly rather than annually. Rates typically run from around 0.55% to 1.5% per month depending on the loan to value, the security and the complexity of the case, with an arrangement fee of around 2%. You will also have valuation and legal fees, and there may be an exit fee on some products. Interest is usually retained or rolled up rather than paid monthly, which means you do not make payments during the term but the interest is added to the balance.

Because the term is short, the total cost of a bridge is often lower than the monthly rate makes it sound, but you should always compare the total cost over the expected term rather than the headline rate. Our broker fee is disclosed in writing before you commit.

How long it takes

Well prepared cases can complete in seven to ten working days, and faster where there is no valuation delay and a second property is used as security. Terms are usually available within 24 to 48 hours. The typical bridging term is between one and eighteen months.

Speed is mostly determined by three things you can influence before you bid: having the legal pack reviewed in advance, instructing a solicitor who has done bridging before, and having a clear exit. Cases that stall almost always stall on legals, not on the lender.

Case study

A client won a property at auction and needed £300,000 within 10 days to complete. We arranged a bridging loan secured against another asset, meeting the auction deadline with a clear exit plan already in place.

Why use a broker for auction finance

Bridging is a whole of market product where the difference between lenders is enormous, both in price and in how fast they actually move. A lender that quotes a low rate but takes three weeks to complete is useless when you have ten days. We know which lenders perform on a deadline, which will lend on an unmortgageable property, and which will take a second charge, and we get terms in place before you bid rather than after.

We are registered with the NACFB and FIBA. Bridging is short term, secured against property, and your property may be repossessed if you do not repay it. We will always tell you if we think an exit is not realistic.

Frequently asked questions

How fast can bridging finance complete after an auction win?

Well prepared cases can complete in seven to ten working days, and sometimes faster. Having a valuation, a solicitor and a clear exit ready in advance makes the biggest difference to speed.

What if the property is not mortgageable yet?

That is one of the most common reasons buyers use bridging. You can complete on the purchase, carry out the works, then refinance onto a standard mortgage once the property qualifies.

What happens if I cannot arrange finance in time after winning at auction?

You typically remain contractually bound to complete and risk losing your deposit, and you can be pursued for any shortfall if the property is resold for less. Arranging bridging finance or at least an agreement in principle before you bid is strongly recommended.

Can I arrange bridging before the auction?

Yes, and you should. We can put terms in principle in place based on the lot and the legal pack so you bid knowing your funding is behind you.

How much can I borrow against an auction property?

Bridging is normally offered up to around 70 to 75% of value, and lenders usually work from the lower of the purchase price and the valuation. Where you need the full purchase price, additional security over another property is the usual solution.

Do I need to make monthly payments on a bridging loan?

Usually not. Interest is normally retained from the advance or rolled up and settled when the loan is repaid, which keeps cash free during a refurbishment.

Can I use bridging for a commercial or mixed use auction lot?

Yes. Commercial, semi commercial and mixed use lots are all fundable, though the loan to value is often slightly lower than on residential and the exit will need to be a commercial mortgage or a sale.

What is an exit strategy and why does it matter so much?

It is how the bridge gets repaid, normally a sale or a refinance onto a longer term mortgage. It matters because the lender is lending on the strength of that repayment. A vague exit is the most common reason an auction bridging case is declined or delayed.

Related guides

Speak to us before you bid

Send us the lot and your maximum bid and we will tell you what is fundable, what it will cost and how fast it can be done. We respond the same working day. Contact Sadi's Commercial Finance.