Auction Finance

Auction finance is a type of short-term bridging loan designed specifically to fund property purchases made at auction. When you buy at auction, you typically pay a 10% deposit on the day and have 28 days to complete the purchase. Traditional mortgage lenders cannot move fast enough to meet this deadline; their processes often take 6 to 12 weeks.

Auction finance bridges this gap. The lender provides the remaining 90% of the purchase price (minus your deposit) within the 28-day window. The loan is secured against the property being purchased and is designed to be repaid within a short period, typically 6 to 24 months, via a defined exit strategy such as selling the property, refinancing onto a longer-term mortgage, or completing a refurbishment and selling at a higher value.

Yes, and we strongly recommend it. Getting a decision in principle (DIP) before auction day means you know exactly how much you can borrow, what the terms will be, and that your funding is in place before you start bidding. This removes the financial uncertainty and allows you to focus on the property itself.

To get pre-approved, send us the lot details from the auction catalogue: the property address, guide price, legal pack (if available), and your intended exit strategy. We can typically provide a DIP within hours, giving you time to prepare well before auction day. The DIP is subject to valuation and legal due diligence, but having it in place significantly reduces the risk of the transaction falling through.

For straightforward cases where the valuation is quick and the legal pack is clean, we can complete in as little as 7 days. The standard 28-day auction deadline is comfortably achievable for the vast majority of transactions we handle.

The speed of completion depends on several factors: the complexity of the title, the availability of the legal pack, how quickly the valuation can be arranged, and whether there are any unusual features about the property that require additional investigation. By getting pre-approved before auction day and having the legal pack reviewed in advance, you can significantly reduce the time needed after the auction.

Failing to complete within the deadline is a serious matter. You risk losing your 10% deposit (which is non-refundable), and the seller may also pursue you for any additional losses, for example, if they resell the property at a lower price. In some cases, interest penalties accrue for every day of delay beyond the completion date.

This is precisely why working with a specialist auction finance lender is so important. Mainstream lenders and generalist brokers may not fully appreciate the urgency of the auction timeline. At StatusKWO, our entire auction finance process is built around meeting the 28-day deadline with time to spare, and we have a strong track record of completing within the required timeframe.

You typically pay a 10% deposit on the day of the auction when the hammer falls and contracts are exchanged. This deposit must come from your own funds; it cannot be financed by the auction lender. The remaining 90% of the purchase price is covered by the auction finance facility on completion.

Some auctions accept deposits by debit card, while others require a banker's draft. Check the auction house's terms in advance so you have the right payment method prepared. You should also budget for the costs of the finance facility (arrangement fee, valuation, legal fees) on top of the deposit, as these are usually payable on or around completion.

Yes, and this is one of the most common uses of auction finance. Many of the best opportunities at auction involve properties that need refurbishment, are currently uninhabitable, or have characteristics that put them outside standard lending criteria. High-street banks and mainstream mortgage lenders will not fund these types of properties, which is why they often sell at below-market prices.

As a specialist lender, we regularly finance properties in poor condition, including those with structural issues, no functioning kitchen or bathroom, damp, or subsidence. We assess the property based on its current value and your plan for it, and we can structure the facility to include an allowance for refurbishment costs if needed.

We accept the same range of exit strategies as our standard bridging loans. The most common exits for auction purchases include sale of the property (either as-is or after refurbishment), refinance onto a buy-to-let mortgage or commercial mortgage, and refinance onto a development finance facility if the property will be subject to a larger building project.

Many auction buyers purchase properties below market value, carry out a refurbishment to add value, and then either sell for a profit or refinance onto a long-term mortgage at the improved value. Both of these are well-established exit strategies that we are very comfortable with.

Yes. As an asset-based lender, we focus primarily on the quality of the property and the strength of your exit strategy. While we do review credit history as part of our assessment, adverse credit events such as CCJs, defaults, missed payments, or previous bankruptcy do not automatically disqualify you from obtaining auction finance.

We take a pragmatic, common-sense approach and consider the full picture. If the property represents good security and your exit plan is realistic, we can often find a workable solution where other lenders cannot. If you have concerns about your credit history, we encourage you to discuss it with us upfront so we can give you an honest assessment before auction day.

The fees for auction finance are similar to a standard bridging loan. They typically include an arrangement fee (a percentage of the loan amount), a valuation fee (paid to the independent surveyor), legal fees (for both your solicitor and the lender's solicitor), and an exit fee where applicable.

We are fully transparent about all costs and provide a complete breakdown when we issue terms. There are no hidden charges. It is important to factor these costs into your auction budget alongside the 10% deposit so you have a clear picture of the total outlay before you bid. If you would like an estimate for a specific lot, contact us with the details and we will provide a full cost breakdown.

Auction finance is essentially a bridging loan that has been specifically structured and optimised for auction purchases. The underlying product is the same, a short-term secured loan against property, but the process is tailored for the unique requirements of the auction timeline.

The key differences are the emphasis on speed (completing within 28 days), the ability to get pre-approved before the auction, and the streamlined legal and valuation processes that are designed to meet tight deadlines. The rates, LTV ratios, and terms are generally the same as a standard bridging loan. If you are buying at auction, it is important to work with a lender who specifically understands the auction process and has a proven track record of completing within the required timeframe.