Auction Finance

Secure Auction Finance Quickly Using Brickflow

Brickflow is the best way to secure the most competitive auction finance in the UK, and quickly. It takes just three simple steps:

• SEARCH & COMPARE loans from 40+ auction bridging lenders instantly
• RECEIVE a same-day DIP (our record is 7 minutes!)
• APPLY directly from the platform with your advisor or a Brickflow partner

With our live market search, it takes just seconds to enter the details of your property and compare loans from the breadth of the bridging market. You can find out exactly how much you can borrow and how much it will cost, with details on the latest interest rates, lender fees and maximum LTV ratios for your specific project. You can also model your project against live loan costs, so you can quickly check if your deal stacks (and calculate your maximum bidding price on the property).

Our bridging loan calculator is the only real-time loan calculator on the market that gives you instant access to auction finance options, so you can be confident you’ll find the best deal available.

What’s more, when you apply for auction bridging finance through Brickflow, you can use our 1x online application to apply to any lender. If one lender says no, instead of a new form fill, it’s one click to send to a different lender . It covers everything lenders need to know to make quick and reliable decisions. So you can secure your loan in days.

What is Auction Finance and How Does It Work?

Auction finance is a type of bridging loan that can be used by property investors and developers to purchase properties at auction. 

Buying a property at auction is not the same as buying via traditional sales and finance processes. Firstly, if you win the bid, you must pay a deposit of 10% of the purchase price on the day of the auction.

Secondly, the sale must normally be completed within 28 days, or you will most likely lose your deposit and right to buy the property. Traditional long-term finance solutions can’t match these short timelines, hence the need for fast, flexible auction property finance.

Auction finance works like most other bridging loans in that it is a short-term loan that acts like a quick cash injection. Interest is charged monthly but rolled up and paid at the end of the loan term – so the loan usually doesn’t have to be serviced on a monthly basis. The loan is secured against the property, or with additional properties, and repaid by selling or refinancing.

Criteria Requirements When Securing Auction Finance

Criteria requirements for auction finance will vary from lender to lender, but in general eligibility and criteria requirements will be as follows:

*The interest rate you pay is determined by various factors, including the LTV of the property, property type and condition, your planned project, your exit strategy, and your own strength as a borrower, primarily your experience of doing the same, net asset value, and credit file

Benefits of Auction Finance

• Quick completion times: 2-3 days – 4 weeks (traditional mortgages take upwards of 10 weeks)
• Flexible borrowing: Auction bridging finance typically doesn’t incur any early repayment penalties after the minimum term has been met
• Creates market opportunities: As well as longer timescales, traditional mortgages typically don’t offer finance for the types of property often found at auction, such as uninhabitable properties
• Rolled-up interest: Borrowers lacking disposable income don’t have to meet costs from the first month of loan draw-down
• Less stringent criteria: Assessed on property value, project viability and securing assets, so it’s still possible to secure auction finance with poor credit history or cash flow problems
• Can be unregulated: Hence, lender flexibility and speed to arrangey)

To find out more, read our guide about the pros (and cons) of bridging loans.

Costs & Fees Associated with Auction Finance

Auction Finance loan rates

Currently, bridging lenders on the Brickflow platform are offering auction finance rates between 7% and 15%.

Lower LTV applications can secure lower rates, but around a 40% deposit is required for the better rates to kick in.

On Brickflow, you can instantly search loans from over 40 bridging lenders to see live borrowing results and find out exactly what rates you could secure for your project.

Additional costs to consider

• Valuation or survey fees: Lenders should provide quotes from more than one firm and let you decide
• Legal fees: The lender’s legal fees, as well as your own
• Broker fees: Normally paid by the lender
• Arrangement fees: Up to 2% of the net or gross loan
• Exit fees: They can exist but are not that common for bridging finance. Almost none of the lenders on the Brickflow platform charge exit fees, but they instead might stipulate minimum loan term – between 1 & 6 months normally
• Auction house administration fee: Payable along with the 10% deposit; it can be a fixed fee or a percentage of the purchase price. Details will be given in the information catalogue (these may differ from one auction house to another). 

What Properties Does Property Auction Finance Cover?

Property Auction Finance can be used for residential, mixed-use and commercial properties (as an investment or owner-occupied), as well as funding land purchases.

Types of residential properties that auction finance can cover:

• Houses and flats
• Uninhabitable or unmortgageable housing - no working kitchen or bathroom, disconnected utilities, structurally unsound, made of non-standard construction.
  

Types of commercial properties that auction finance can cover:

• Care and Retirement homes
• Education
• Light and Heavy Industrial
• Hotel
• Leisure complexes
• Licenced HMO
• Medical
• Mixed Use (part residential, part commercial)
• Mixed Use (All commercial)
• Multi-Unit Freehold Block (MUFB)
• Office
• Retail
• Student
• Any commercial property not in immediately habitable condition

Tips for Securing Auction Finance

When buying a property at auction, the first and most important rule is to stick to your budget. Seasoned property investors know this well, but if you’re new to buying at auction, it’s easy to get swept up in the moment.

To accurately calculate the ceiling price for your auction purchase, you need to understand your borrowing costs. When you know the exact borrowing costs, you can work backwards to calculate your profit and the maximum price you should pay for the property in order for the deal to be viable.

Running your project numbers through Brickflow is the quickest, most accurate way to calculate auction finance costs, and it takes just 30 seconds.

If you’re sure you’ve got a deal that stacks, then lenders will see that too. So here are our top tips for securing auction finance:

• Prepare your documentation as soon as possible: Including ID, proof of address, your financials and your developer CV if necessary
• Present your project professionally: If your auction purchase is a development project, show the lender how you will use the loan, specifics on building costs, completion timescales and expected GDV with supporting market research
• Don’t be fluffy about your exit strategy: A lender’s primary concern is how they will be repaid. Make sure you’re clear about your plans and don’t say, ‘I’ll maybe sell, maybe rent, depending on the market.’ If you plan to refinance but have credit issues, securing a mortgage could be difficult, making your exit strategy risky for lenders
• Be upfront about credit issues: Tell lenders from the get-go about any previous bankruptcy, CCJs or other issues
• Work with a specialist bridging broker: Brokers have a depth of knowledge that they’ve gathered over years of working in the industry, day-in and day-out. They know the market better than you ever can – tap into their expertise and networks to ensure you get the right loan
• Choose the right lender: Your broker will know who to work with to get your auction finance over the line on time and at the right price
• Choose the right solicitor: A solicitor with no experience in bridging loans can drastically hold up progress of the loan – when you only have 28 days to complete, don’t take that risk

Refinancing Your Auction Property Purchase

Once you’ve bought your auction property, you’ll repay your auction finance by selling or refinancing. This will depend on the type of property you bought and what you plan to do with it. 

You might have purchased, refurbished and sold the auction property within the agreed loan term. Or you may want to refinance onto one of the following loan types:

• Development finance: For large-scale development work, where planning permission may be required (residential or commercial)
• Commercial mortgage: Long-term finance for commercial and semi-commercial investment properties or owner-occupied
• Buy-to-let mortgage: If you’re buying a residential investment property that you plan to keep and let out
• Personal mortgage: If your auction purchase is a home for you to live in

Auction Loan Examples

To better understand how finance for auction property works, we’ve outlined some examples of auction loans.

Scenario A: Purchase a bridging loan on a £250,000 residential property purchase

In this example loan, lender costs (interest for the full term + arrangement fees) equals £21,657, leaving the borrower with a net loan of £165,843 and deposit requirements of £84,157 (£25,000 of which will have been paid at the auction).

Scenario B: Refurbishment Bridging

If the auction property requires some level of work, refurbishment bridging can be used, allowing costs for the works to be added to the loan. For a residential purchase of £200,000 with £50,000 of refurbishment required and an end GDV of £340,000, an example loan would look like this:

Here, the lender offers both a property loan (land loan) and a build loan, with the borrower requiring £60,000 in deposit.

How To Apply For Auction Finance

The easiest and quickest way to apply for auction finance is by using Brickflow.

1. SEARCH & COMPARE live loans from 40+ bridging lenders, instantly
2. RECEIVE a same-day DIP (our record is 7 minutes)
3. APPLY for a loan using our lender-favoured online application

Here’s how it works:

• Input data – Enter the details of your auction purchase into Brickflow’s bridging loan calculator – It takes seconds
• Instantly search the breadth of the market – With over 40 bridging lenders on the Brickflow platform, including banks, non-banks and specialist lenders, you can be confident you’ll find the best deal
• Compare and shortlist your preferred loans – Your search results will show you live market loan options with details on LTVs, interest rates, fees and deposit requirements.
• Submit to multiple lenders directly from the platform – With your broker or a Brickflow partner, you can submit your loan application to multiple lenders using our digital application form, cutting out any repetitive form-filling
• Receive your same-day DIP (Decision in Principle) – Our record for receiving a DIP back is 7 minutes!
• Apply online – After looking over your DIPs, apply to your preferred lender. Your broker will manage your application and ensure you’re happy with the loan terms. Lenders love applications from the Brickflow platform because we cover everything they need to know to make quick and reliable credit decisions. Missing or incorrect information can easily (and very often does) delay securing your bridging loan

Search for your auction finance now and see the great deals available on Brickflow.