Calculate auction finance costs for UK property purchases. Find bridging loan monthly interest, total cost, and whether the numbers stack up before bidding.
Auction finance (usually a bridging loan) provides fast short-term funding to complete a property purchased at auction. Auction purchases require a 10% deposit on the day and full completion within 28 days (or sometimes 56 days for certain auctions). Most buyers cannot arrange a mortgage that quickly, so auction finance bridges the gap until a longer-term mortgage or sale of another property completes.
Specialist auction finance lenders can typically complete within 5-14 working days. Some lenders offer pre-approval (approval in principle) so you know your borrowing capacity before bidding. Unlike mortgages, bridging loans are assessed primarily on the property's value (exit strategy) and less on your income — making them faster to arrange.
Auction finance typically costs 0.5-1.5% per month (6-18% annualised), depending on LTV, property condition, and borrower creditworthiness. Arrangement fees of 1-2% of the loan are common. A 6-month bridging loan at 0.85%/month on a £120,000 loan would cost £6,120 in interest plus fees — factor this into your maximum bid calculation.
Most bridging lenders offer up to 70-75% LTV on standard residential properties, and up to 65-70% on commercial or mixed-use properties. Some lenders will go to 80% for strong deals. 'Day 1 land' (undeveloped sites) typically attracts lower LTVs of 50-65%. Always check the gross LTV (the loan as a % of auction purchase price, not the higher potential value).
If you cannot repay by the agreed maturity date, lenders typically offer a short extension (for a fee) if exit is in progress. If you cannot repay and an exit is not viable, the lender may enforce their first charge security over the property — typically via an LPA receiver who sells the property to recover the debt. Always have a clear exit strategy (refinance or sale) before taking auction finance.