Buying at auction with a bridging loan: the 28-day deadline

Buying a property at auction is quick. When the hammer falls, you are usually committed to the purchase, and you normally have a short time to complete. A bridging loan is one way to find the money in time, but it needs preparing before the day.

The usual deadline

Many auctions give the buyer around 28 days to complete, although the date is set out in the auction's legal pack, so always check it for the lot you want. If you miss the date, you may lose your deposit and face further costs. That is why finance should be lined up before you bid.

What happens on auction day

• You normally pay a deposit on the day, commonly 10% of the price, so you need that money available.
• You may also pay a buyer's fee or other charges, which vary between auction houses.
• You sign a contract and are committed to complete.

How a bridging loan can help

Bridging loans can be arranged more quickly than a typical mortgage, and lenders will consider properties that a high street lender might not, for example a property that is empty or needs work. The loan is short term and secured on property, and it is repaid when you sell the property or refinance onto a longer-term loan.

What lenders look at

• The property. Its value, condition and whether it can be sold or refinanced.
• Your exit. How you plan to repay the loan, for example by sale or a longer-term mortgage. A clear and realistic exit is essential.
• Your experience and finances. Your track record, other assets and borrowing.
• The legal pack. Lenders and solicitors will read it, so give it to them as early as you can.

Before you bid

• Read the legal pack and have your solicitor review it
• Speak to your adviser so that a lender and valuer can be lined up
• Work out your total costs, including interest and fees
• Decide your exit and think about what happens if it takes longer than planned

Costs and risks

Bridging loans can be expensive, and interest is often added to the loan rather than paid monthly. Because the loan is secured on property, your property may be at risk if you cannot repay. Think carefully, and make sure you understand the total cost.

Find out more

Read more about bridging loans, or see our local pages for places such as London and Colchester.

Talk it through

If you have an auction in mind, get in touch before the date so that we can plan your finance with you.