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Auction Bridging Finance (Part 1)

Georgina Gray explains how auction bridging finance works, including criteria, fees and more. Part one of two.

What is auction bridging finance? How does auction bridging finance work?

Auction bridging finance is a short-term loan that is designed to help people who want to complete a property purchase quickly. It can be ideal for auctions where you usually have to complete within a short timeframe, such as 28 days. The lender provides the funds, and repayment can occur once you sell the property, refinance, or secure a longer-term mortgage.

What are the eligibility criteria for auction bridging finance?

Most lenders are typically looking for a clear exit strategy, which means they want to know how you plan on repaying the loan. They may also want to see proof of income and your ability to cover the interest. Lenders often look for a property that is suitable for lending against and a reasonable deposit, which could be around 25% to 30% of the purchase price.

What are the interest rates for auction bridging finance?

The rates for bridging finance are usually higher than standard mortgages. They are typically between 0.5% and 1.5%, and the interest is charged per month on the whole loan amount. The monthly charge is due to the short-term nature of the loan. The exact rate can depend on the property, the buyer’s experience, and their credit profile.

How is the loan amount decided for auction bridging finance?

The loan amount is mainly based on the property’s value or purchase price, whichever is lower. Lenders often factor in your deposit, any planned refurbishments, and the strength of your exit strategy.

What is the repayment period for auction bridging finance?

Most auction bridging loans typically run from one to twelve months. Many borrowers aim to pay it off within six months, as the interest is charged monthly, which can help keep costs lower. Longer terms might be available if the lender agrees.

Are there any additional fees associated with auction bridging finance?

Yes, in addition to the monthly interest, there can be common fees. These might include an arrangement fee, which often depends on the loan amount and is usually 1% to 2% of the borrowed amount. There could also be a valuation fee and legal fees, as you may need to seek legal advice. In some cases, there might be exit fees. It can be important to get all of the fees in writing before applying to understand the total cost.

What happens if I need to extend the loan term for auction bridging finance?

If your exit plan is delayed, extensions are sometimes possible, but they may involve extra fees or a higher interest rate for the extended period. It can be important to inform your broker and lender as early as possible to understand your options and potential costs.

Anything else to add?

It is often key to plan when dealing with auctions, especially when purchasing with bridging finance. Knowing exactly how you are going to repay the loan before you even bid at an auction can be very helpful. Working with an experienced broker who could line up the finance in advance for you, and allow you to bid with confidence and potentially avoid last-minute stress.

SOME BRIDGING FINANCE IS NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

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Auction Bridging Finance (Part 2)

Georgina Gray is back to answer more questions about auction bridging finance in this second and final part of our recording from September 2025.

What are the risks involved in auction bridging finance?

Bridging finance carries a primary risk due to its short-term nature. If you’re unable to refinance, sell, or repay within the agreed period, there could be additional costs, or the lender could take steps to recover the debt. That’s why it’s really important to have a clear repayment strategy in place before committing.

Can auction bridging finance be used for non-residential properties?

Yes, absolutely. Bridging finance can be used for a wide range of property types, including commercial, mixed-use, or land. The terms will depend on the lender, the property, and, again, the exit strategy that you’ve got in place.

Is auction bridging finance available for properties outside the UK?

Generally, no. Bridging finance loans are typically for properties within the UK. Purchasing property overseas usually requires different types of finance, and you would need to find lenders who specialise in international property, as this would be a completely separate process.

How long does it typically take to get approval for auction bridging finance?

Speed is one of the main advantages of bridging finance. In some cases, approval can be arranged within a matter of days. It does, however, depend on the lender and how quickly documents are provided. It’s often much faster than a traditional mortgage, which is why it’s especially good for auction.

Can I use auction bridging finance if I already have a mortgage on another property?

Yes, you can. Many people who use bridging finance already have mortgages on other properties. The key point is whether the loan can be secured and whether you can demonstrate, again, a clear repayment plan – a clear exit strategy from the bridge.

Are there any restrictions on how the auction bridging finance funds can be used?

Lenders do typically want the funds to be used for property-related purposes, such as completing a purchase, carrying out refurbishment, or covering auction deadlines. The specifics vary, so it’s always best to check the terms at the outset.

What happens if I fail to repay the loan for auction bridging finance on time?

If repayment doesn’t happen by the end of the agreed term, you could face higher interest charges, fees, or, in the worst case, repossession of the property that’s being used as security. That’s why, again, just because it’s so important, a well thought out exit plan is key from the outset.

How can a broker help? Have you got anything else you’d like to add?

A broker can guide you through the whole process, from explaining how you can find lenders that are suitable for your circumstances to making sure that you’re prepared for auction timelines as well. They can also highlight potential risks and ensure that you fully understand what you’re getting into, and how you’re going to be repaying that as well.