Some of the best property deals are hidden behind boarded-up windows.
Derelict and non-mortgageable properties often sell well below market value — but they also scare off most high-street lenders.
That’s where auction finance comes in.
This short-term funding can help you buy, refurbish, and refinance properties others can’t touch. Here’s how it works.
What Makes a Property “Unmortgageable”?
Lenders use this term when a property doesn’t meet their minimum condition standards. Common reasons include:
- No kitchen or bathroom
- Severe damp or structural issues
- Fire or flood damage
- Missing utilities or roof
- Lease issues (short leases or absent freeholders)
High-street lenders see these as too risky. Auction finance lenders, however, look at potential, not condition.
How Auction Finance Solves the Problem
Auction finance (or a bridging loan) is designed for speed and flexibility.
Lenders base their decision on the property’s current value and your exit plan, rather than its current state.
You can:
- Borrow up to 75% of the property’s value
- Fund refurbishments quickly
- Refinance onto a standard mortgage once works are complete
Because it’s short-term (usually 6–12 months), auction finance gives you breathing space to turn the property around.
Funding Derelict Properties: The Step-by-Step Process
- Pre-Approval – Get a Decision in Principle from an auction finance specialist before bidding.
- Valuation – The lender assesses current and potential post-works value.
- Offer & Drawdown – Funds can be released within 7–10 days.
- Refurbishment Phase – Complete improvements using your own funds or a refurbishment-inclusive loan.
- Exit – Refinance onto a buy-to-let or residential mortgage, or sell for profit.
Types of Finance Available
Standard Auction Finance:
Ideal for properties that need light cosmetic work.
Refurbishment Bridging Loans:
Include staged drawdowns for more extensive works.
Development Finance:
For heavy projects or rebuilds where planning and full construction are involved.
Example of an Exit Strategy
A client purchases a derelict property for £100,000.
They borrow £70,000 via auction finance, invest £20,000 in refurbishment, and refinance at £180,000 within 6 months.
The new mortgage clears the loan, releases equity, and locks in long-term affordability.
What Lenders Look For
Even flexible lenders need confidence in your plan. They’ll review:
- Property condition and estimated works
- Cost schedule and timeline
- Your exit strategy (sale or refinance)
- Proof of funds for refurb
- Experience (if it’s a heavy refurbishment)
If your plan is realistic and backed by quotes, approval is usually fast.
Case Studies
Case Study 1 – Fire-Damaged Terrace in Birmingham
Investor bought a fire-damaged house at auction for £85,000.
Auction Finance UK secured a £60,000 bridging loan in 8 days.
After £25,000 of refurb, it was valued at £170,000 and refinanced within 5 months.
Case Study 2 – No Bathroom, No Problem
Client purchased a cottage in Cornwall missing basic amenities.
Mainstream lenders refused to lend.
We secured 75% LTV auction finance, and after installing a kitchen and bathroom, the property refinanced onto a residential mortgage at £155,000.
Case Study 3 – Developer Rescue on a Derelict Block
Developer purchased a semi-derelict block of flats at auction for £290,000.
We arranged a refurbishment bridge including staged drawdowns.
Works completed in 7 months, and the developer refinanced on a £510,000 valuation.
FAQs
Ans: Yes. Auction finance is specifically designed for unmortgageable or derelict properties.
Ans: In as little as 5–10 working days if your documents and valuation are ready.
Ans: Not always. Some lenders prefer experience for heavy refurbishments, but light works are fine for first-timers.
Ans: Yes. Some lenders offer refurbishment bridging loans with staged payments.
Ans: You can refinance onto a standard mortgage once the property meets lending criteria.
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