Auction finance (A complete guide)

In this brief guide, we will discuss what auction finance is.

Auction finance?

Auction finance is just a different name for Auction finances. Auction finance is arranged due to its quick turn around from applying to getting one. Auction finance rates are of course higher than traditional residential mortgages.

Auction finance can be used to purchase:


Office buildings

Commercial buildings



What is Auction finance?

Auction finance or bridging mortgage is usually defined as a loan used to bridge the gap between buying and selling a home. It is usually used by home buyers who are in the process of selling their homes but haven’t received the proceeds for the sale as their buyers are far back in the mortgage process or completion is taking much longer and they need to complete on the home purchase of their new homes sooner than later.

Auction finances are not solely used for a property but are well known due to their use in property transactions. Auction finances or bridging mortgages are more common with buyers at the auction house than they are with residential borrowers.

The amount you can borrow with Auction finance or bridging mortgage is determined by the value of the building. With Auction finance or bridging mortgage, the lender will take a first charge over the property. During the Auction finance or bridging mortgage term, your monthly repayments will only be made up of interest and not the capital borrowed.

You will repay the capital borrowed at the end of the term, similar to an interest-only mortgage.

How much deposit do you need for Auction finance or bridging mortgage?

You will usually need a deposit of at least 30% for Auction finance and some Auction finance lenders may require as much as a 40% mortgage deposit for Auction finance.

Auction finance lenders usually offer a loan to value rate of around 70 to 75% for customers who they deem as low-risk customers and for high-risk customers loan to value rates of between 60 and 70%.

You may be able to get Auction finance with no deposit down but you may need to put up collateral to secure the loan.

What are the eligibility requirements for Auction finance or bridging mortgage?

Auction finances or bridging mortgages are usually assessed on a case by case basis but you want to ensure the Auction finance lender sees you as a low-risk borrower. Below are the key points Auction finance lenders may look at when considering your application.

Your experience

If you are a buy to let landlord or you have been involved in the property market for a long time then the Auction finance lender may consider this when looking at your Auction finance application to determine if they will give you Auction finance.

A more experienced applicant may find it much easier to get Auction finance than one who isn’t.

Your credit score & history

When considering a borrower for Auction finance the lender will usually look at their credit scores and history to see what their repayment behaviour has been like and if they deem them creditworthy to lend to. Whilst this is an important factor it isn’t the most important factor.

Your repayment plan

The Auction finance lender will focus more attention on your plan to repay the Auction finance. Will you be getting a mortgage? Do you plan to release equity from another property? Do you have savings and investments which you can use to pay off the Auction finance? Are you waiting on the sale of your property to pay off the Auction finance?

Your repayment plan is the real measure by which Auction finance lender will determine if you meet their eligibility requirements for Auction finance.

Most Auction finance lenders will require some evidence of your repayment plan before they will lend to you.

Your security property

If the way you plan to repay your Auction finance is via selling a property then the Auction finance lender will consider the property and its ability to sell fast and at a reasonable price sufficient to clear the Auction finance. If the property is built with non-standard construction or is a Grade 2 listed building for example then the Auction finance lender may want to see further evidence such as proof of an ongoing transaction as it may consider these types of buildings harder to sell.

Can you get Auction finance or bridging mortgage with bad credit?

You may be able to get Auction finance with bad credit as most Auction finance lenders focus more on the repayment plan rather than your credit score and history when trying to determine your eligibility for Auction finance.

That being said, most Auction finance lenders will look at things on a case by case basis.

If your repayment plan is something that requires you to get further credit such as a mortgage or a remortgage then the Auction finance lender may consider your application more carefully as you may not be able to access further credit with bad credit or you may not be able to get approved for a mortgage or remortgage.

When considering Auction finances or bridging mortgages, bad credit could be:



A debt management plan

A default

A bankruptcy

A home repossession

Auction finance

Using a mortgage broker to get Auction finance

You may want to consider using an independent mortgage broker to get auction finance.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application. Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer. Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.

In this brief guide, we discussed Auction finance. If you have any comments or questions please let us know below.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.