Frequently Asked Questions
Everything you need to know about auction bridging loans, answered clearly by Matt Lenzie and the team at Auction Bridging Loans. If your question is not covered here, get in touch and we will be happy to help.
1What is an auction bridging loan?
An auction bridging loan is a short-term secured loan designed specifically for purchasing property at auction. When you win a property at auction, you are legally required to complete the purchase within 28 days. Because traditional mortgages take 8 to 12 weeks to arrange, a bridging loan provides the fast finance needed to meet the auction deadline. The loan is secured against the property being purchased and is typically repaid within 3 to 12 months by refinancing to a mortgage or selling the property.
2How quickly can a bridging loan complete?
Our lender partner can complete auction bridging loans in as little as 7 working days from initial application. This is significantly faster than the industry average of 2 to 4 weeks. The speed of completion depends on several factors including the complexity of the property title, the availability of valuation access, and how promptly the borrower provides required documentation. For straightforward residential properties with clean titles, 7-day completion is regularly achieved.
3How much can I borrow with a bridging loan?
Most bridging lenders offer loans from £50,000 upwards, with no fixed upper limit for the right property and borrower. The loan amount is primarily determined by the loan-to-value (LTV) ratio. Most lenders offer up to 70% to 75% LTV, meaning you need to contribute at least 25% to 30% of the property value as equity or deposit. For a £400,000 property at 70% LTV, the maximum bridging loan would be £280,000.
4What interest rates do bridging loans charge?
Bridging loan interest rates are quoted monthly and typically range from 0.5% to 1.5% per month, depending on the LTV, property type, borrower profile, and lender. This equates to approximately 6% to 18% per annum. While higher than mortgage rates, bridging loans are short-term products — most borrowers repay within 3 to 6 months, so the total interest cost is a fraction of what a full year would cost. Interest can be paid monthly (serviced), added to the loan (rolled up), or deducted from the advance upfront (retained).
5What fees are involved in a bridging loan?
The main fees are: an arrangement fee (typically 1% to 2% of the loan amount), a valuation fee (£350 to £1,500+ depending on property value), lender's legal fees (£750 to £2,000+), your own solicitor's conveyancing fees, and potentially a broker fee and exit fee. We provide a complete, transparent breakdown of all fees with every quote so there are no surprises. See our detailed Costs and Fees guide for a full breakdown with worked examples.
6What is an exit strategy and why does it matter?
An exit strategy is your plan for repaying the bridging loan at the end of the term. It is the single most important factor in any bridging loan application because the lender needs confidence that they will be repaid. Common exit strategies include refinancing to a buy-to-let or residential mortgage, selling the property after refurbishment, selling another property you own, or receiving funds from another defined source. A strong, well-documented exit strategy can also result in better interest rates.
7Can I get a bridging loan with bad credit?
Yes, it is possible to obtain a bridging loan with adverse credit history, although it may affect the rates and terms available. Bridging lenders focus primarily on the property's value (the security) and the viability of the exit strategy rather than relying solely on credit scoring like mainstream mortgage lenders. Defaults, CCJs, missed payments, and even IVAs or bankruptcy can be considered, though each lender has different appetite for credit issues. Being transparent about your credit history from the outset allows us to match you with the most appropriate lender.
8Do I need a deposit for a bridging loan?
Yes. Most bridging lenders require a minimum deposit equivalent to 25% to 30% of the property value (based on a maximum LTV of 70% to 75%). For auction purchases, the standard practice is to pay a 10% deposit on the day of the auction, with the remaining deposit and loan funds provided at completion. Your deposit can come from savings, the sale of other assets, equity in existing properties, or other legitimate sources. The lender will require evidence of the source of your deposit funds.
9Can I buy a property at auction without attending?
Yes. Many UK auction houses now offer online bidding, telephone bidding, and proxy bidding, allowing you to purchase a property without being physically present in the auction room. The legal obligations are the same regardless of how you bid — you must pay the 10% deposit on the day and complete within 28 days. Bridging loan finance works equally well for properties purchased through any bidding method.
10What types of property can I use a bridging loan for?
Bridging lenders typically accept a wider range of property types than mortgage lenders. Acceptable security usually includes residential houses and flats, buy-to-let properties, HMOs (Houses in Multiple Occupation), commercial properties, mixed-use properties, land with planning permission, properties requiring refurbishment, and properties of non-standard construction. Each lender has slightly different criteria, so it is worth discussing your specific property type with us to identify the most suitable lender.
11Can I get a bridging loan through a limited company?
Yes. Many auction property investors purchase through limited companies or Special Purpose Vehicles (SPVs) for tax efficiency and liability protection. Most bridging lenders are comfortable lending to limited companies, including newly incorporated SPVs set up specifically for the property purchase. The directors will typically need to provide personal guarantees, and the lender will require standard company documentation including the certificate of incorporation, memorandum and articles of association, and details of all directors and shareholders.
12What happens if I cannot repay the bridging loan on time?
If you are unable to repay the bridging loan by the end of the agreed term, the first step is to contact your broker and lender as early as possible. Many lenders will consider extending the loan term, sometimes with a modest extension fee or adjusted interest rate. If an extension is not possible and the loan is not repaid, the lender has the right to take possession of the property and sell it to recover the outstanding debt, as the loan is secured against the property. This is a last resort, and most situations are resolved through term extensions or alternative refinancing arrangements.
13Is auction bridging finance regulated?
Bridging finance for investment and commercial property is unregulated. All facilities arranged through Auction Bridging Loans are unregulated commercial lending — we do not arrange consumer credit regulated by the FCA.
14How does a bridging loan differ from a mortgage?
Bridging loans and mortgages are both secured against property, but they serve different purposes and have different characteristics. Bridging loans are short-term (typically 1 to 18 months), have monthly interest rates (0.5% to 1.5%), can complete in days rather than weeks, and are designed as temporary finance. Mortgages are long-term (25 to 35 years), have annual interest rates (typically 4% to 6%), take 8 to 12 weeks to complete, and are designed as permanent finance. Bridging loans are the solution when you need to act fast and a mortgage is too slow.
15Can I use a bridging loan to buy a property that needs renovation?
Absolutely. In fact, refurbishment properties are one of the most common uses for bridging loans. Many properties sold at auction require some level of work, ranging from light cosmetic refurbishment to full structural renovation. Bridging lenders are experienced in lending against properties in poor condition, which mortgage lenders would typically decline. Some bridging lenders also offer additional funds for the renovation works themselves, released in stages as the work progresses.
16What is the difference between first charge and second charge bridging?
A first charge bridging loan means the bridging lender has the primary secured claim on the property. This is the most common arrangement when buying at auction, as the property typically has no existing mortgage. A second charge bridging loan sits behind an existing mortgage. This might be used if you want to raise funds against a property you already own (which already has a mortgage) to fund an auction purchase. Second charge bridging loans are more complex and typically carry higher interest rates because the lender's risk is greater.
17Do I need planning permission before getting a bridging loan?
Not necessarily. You can obtain a bridging loan on a property without planning permission, but if your exit strategy depends on obtaining planning permission (for example, to convert a commercial property to residential), the lender will factor this risk into their decision. Some lenders are comfortable lending where planning is anticipated but not yet granted, while others require planning consent to be in place. If your project depends on planning permission, discuss this with us at the initial enquiry stage so we can advise on the most appropriate approach.
18Can foreign nationals get UK bridging loans?
Yes, some UK bridging lenders will lend to foreign nationals, although the criteria and documentation requirements are typically more extensive. The lender will need to satisfy enhanced due diligence requirements under UK anti-money laundering regulations, and the borrower will need to provide identity verification that meets UK standards. Additional documentation relating to the source of funds and the borrower's connection to the UK property market may be required. Having a UK-based solicitor and a clear exit strategy are essential.
19What is a Decision in Principle (DIP)?
A Decision in Principle (DIP) is a formal indication from a lender that they are willing to lend to you, based on the initial information provided, subject to satisfactory valuation of the property and legal due diligence. A DIP is not a binding commitment, but it gives you confidence that finance is available before you bid at auction. Our lender partner can issue a DIP within hours of receiving your initial enquiry. We recommend getting a DIP in place before attending any auction.
20What is a RICS valuation?
A RICS valuation is a formal property valuation conducted by a surveyor who is a member of the Royal Institution of Chartered Surveyors. All bridging lenders require an independent RICS valuation before they will release funds. The valuer physically inspects the property, assesses its condition, considers comparable sales data from HM Land Registry, and provides a formal report stating the property's open market value. This valuation protects both the lender and the borrower by ensuring the loan amount is appropriate relative to the property's true value.
21Can I refinance a bridging loan to a buy-to-let mortgage?
Yes, this is the most common exit strategy for auction bridging loans. You use the bridging loan to complete the auction purchase quickly, then apply for a buy-to-let mortgage at a competitive long-term rate. When the mortgage completes, the proceeds are used to repay the bridging loan in full. The key is to ensure the property meets buy-to-let mortgage criteria — it must be habitable and in lettable condition. If the property needs refurbishment, you may need to complete the works before refinancing, which is why most bridging loan terms are 6 to 12 months.
22What is the maximum term for a bridging loan?
Most bridging loans have a maximum term of 12 to 18 months, although some lenders offer terms up to 24 months for complex projects. The term you choose should align with your exit strategy. If you plan to refinance to a mortgage within 3 months, there is no need to take a 12-month term. However, it is sensible to allow some buffer — if you expect to refinance in 3 months, consider a 6-month term to allow for unexpected delays. Many lenders do not charge early repayment penalties, so repaying early saves interest.
23How do I choose between different bridging loan offers?
When comparing bridging loan offers, look beyond the headline interest rate. Calculate the total cost of borrowing including arrangement fees, valuation fees, legal costs, and any exit fees. Consider the interest charging method (serviced, rolled up, or retained) and whether there are early repayment charges. Also assess the lender's track record for delivering on promised timescales — a slightly higher rate from a lender who completes reliably in 7 days is better than a lower rate from one who takes 4 weeks. This is where an experienced broker adds genuine value.
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If your question was not answered above, contact us directly. Matt Lenzie and the team respond to every enquiry personally and are happy to discuss your specific situation.