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Bridging Loans Explained: A Guide for Property Auction Buyers

Publish Date: 24 February 2025

By Jade Shrubsole

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Further reading

The Leasehold and Freehold Reform Act 2024 introduces significant changes to leasehold property laws in the UK

Who Can Benefit from Buying a Property at a UK Property Auction?

Bridging Loans Explained: A Guide for Property Auction Buyers

What is a Bridging Loan?

A bridging loan is a short-term financing solution, typically lasting up to 12 months. It provides immediate funds to bridge the gap between purchasing a property and securing long-term financing. Bridging loans are often faster to arrange than Buy to Let mortgages and can be used for properties requiring extensive renovations or those with short leases.

Why Use a Bridging Loan?

Bridging loans are particularly popular with auction buyers due to the quick access to funds they provide, ensuring the 28-day completion deadline is met. Whether you're buying your first home, flipping a property for profit, or adding to your rental portfolio, a bridging loan can secure your purchase when time is critical.

Bridging loans offer flexibility as repayments are typically made at the end of the loan term, including interest accrued, rather than monthly instalments. Some lenders even allow early repayment without penalties, saving on interest and fees.

When is a Bridging Loan the Best Option?

• Tight Completion Deadlines: Auctions often have strict 28-day completion requirements. If your lender falls through at the last minute, a bridging loan can ensure you meet the deadline and avoid losing your deposit.
• Renovation Projects: Many auction properties need significant work before they are eligible for standard Buy to Let mortgages. A bridging loan provides time to renovate and apply for a long-term mortgage later.
• Short Lease Properties: If a property has a short lease, securing a Buy to Let mortgage can be challenging. A bridging loan allows time to extend the lease and then switch to a long-term mortgage. 

What Are the Risks?

Like any loan, bridging finance carries risks. Failure to repay on time could result in repossession of the property used as security. It's essential to have a clear repayment strategy to avoid financial difficulties. 

Buy to Let Mortgages: A Long-Term Solution for Property Investors

What is a Buy to Let Mortgage?

A Buy to Let mortgage is designed for properties intended for rental purposes. It is typically repaid monthly over several years and can be either interest-only or a repayment mortgage. Renting out a property without a Buy to Let mortgage may breach existing mortgage terms.

When is a Buy to Let Mortgage the Right Choice? 

• Standard Properties at Auction: If you've purchased a property in good condition that only needs minor updates, a Buy to Let mortgage is ideal. It provides long-term financing, repaid through rental income.
• Benefits: A Buy to Let mortgage spreads the cost over many years, making it more manageable, especially when funded by rental income.

What Are the Risks?

Delays in securing a Buy to Let mortgage could jeopardize auction purchases, but working with a specialist lender ensures a faster process. As with any mortgage, failure to meet repayments can result in property repossession. Vacancies or non-paying tenants can also impact your ability to meet monthly payments, making rent guarantee or unoccupied landlord insurance advisable.

Expert Insight from Together Finance:

“At Together, we’ve opened the doors to thousands of auction buyers over the last 20 years, helping them to achieve their property ambitions by being flexible when it comes to property types, income and employment, and credit history.

Funding can be pre-approved in minutes, at no upfront cost. We would conduct a free desktop valuation / automated valuation and soft credit search, aiding your confidence to bid.

Ready to explore auction finance from Together? Find out more and get a decision in principle today.

– Scott Hendry, Director of Auction Finance at Together