Menu
Call any time
0208 143 7779
This is where bridging loans shine. Designed for speed and flexibility, bridging loans are a lifeline for buyers needing to act fast. In this guide, we’ll explore why bridging loans are ideal for auction purchases, supported by real-world case studies that demonstrate their value.
Key Features of Bridging Loans
Auction purchases require a 10% deposit on the day and the balance within 28 days. Traditional mortgages can take months to process, leaving you unable to complete the transaction.
Rapid approvals ensure you meet deadlines. Many lenders release funds within a week, ensuring you don’t lose your 10% deposit or
Scenario: An investor purchases a £350,000 property at auction but needs to pay the balance within 28 days.
Solution: Using a bridging loan arranged within 10 days, the investor completes the purchase on time. After light renovations, they refinance the property with a buy-to-let mortgage, repaying the bridging loan in full.
Auction properties often include:
Traditional lenders rarely fund such properties, but bridging loans are specifically designed to accommodate these complex cases.
Scenario: A buyer secures a derelict house at auction for £180,000. The property is uninhabitable and unsuitable for a mortgage.
Solution: A bridging loan is used to fund the purchase and initial refurbishment. Once the property meets mortgage standards, the buyer refinances onto a standard buy-to-let loan.
Funds for Renovation Projects
Many auction properties require significant refurbishments before they can be rented or sold. Bridging loans not only fund the purchase but also provide extra capital for renovations.
Scenario: An investor buys a £200,000 house at auction, planning to spend £40,000 on upgrades to increase rental yield.
Solution: A bridging loan covers the purchase and renovation costs. After completing the works, the investor refinances with a buy-to-let mortgage, increasing the property’s value to £300,000 and generating higher rental income.
Capitalising on Below-Market Deals
Auction properties often sell below market value, creating opportunities for significant returns. Bridging loans allows investors to seize these opportunities quickly.
Scenario: A developer wins a mixed-use property at auction for £500,000, which is valued at £600,000 in its current state.
Solution: A bridging loan secures the purchase, giving the developer time to either refinance or sell the property at market value, netting a £100,000 profit.
Bridging loans are approved and disbursed far quicker than traditional mortgages, enabling you to meet tight deadlines.
Whether it’s a derelict building or a mixed-use property, bridging loans offer unmatched flexibility.
Missing the payment deadline risks forfeiting your 10% deposit. Bridging loans prevent this by ensuring funds are ready when needed.
By acting fast, you can secure high-potential properties before the competition.
Work with a Specialist Broker: A broker like Auction Finance ensures your application is matched with the right lender, tailored to your needs.
Get a Decision in Principle (DIP) Before the Auction: Having a DIP ready ensures confidence when bidding and speeds up the application process.
Prepare a Clear Exit Strategy: Most lenders require a solid plan for repaying the loan, whether through refinancing or selling the property.
Engage Solicitors Early: Choose solicitors experienced in bridging finance to handle the legal aspects efficiently.
Ans: Yes, bridging loans are versatile and cover residential, commercial, and mixed-use properties, as well as land purchases.
Ans: Funds can be released in as little as 7-10 days, depending on the complexity of the transaction.
Ans: Most lenders require at least 25% of the property value as a deposit.
Ans: While bridging loans carry higher interest rates than traditional mortgages, their flexibility and speed make them invaluable for time-sensitive purchases.
Ans: Missing the deadline can result in losing your deposit and the property. A bridging loan ensures this doesn’t happen.
(C) 2025 Auction Finance is a trading name of Mortgage Knight Ltd