Financing an auction purchase in 28 days

Winning at a traditional auction usually means paying a deposit, often 10%, on the day and the balance on completion, typically about four weeks later. Under the RICS Common Auction Conditions the default completion date is 20 business days after the auction. Your money has to be ready by then, because a lender's delay does not change the contract.

Cash

Cash is the simplest route. Set aside enough for the price, fees, tax and any works, not just the deposit. The auctioneer and your solicitor will ask where your money comes from as part of anti-money laundering checks, so have statements ready.

Bridging loans

Bridging finance is short-term borrowing that can often be arranged quickly, and is commonly used for auction purchases or for property a mainstream lender will not yet accept. It usually costs more than a mortgage, often with arrangement and exit fees, and you need a clear plan to repay it, such as refinancing or selling. Some bridging loans are regulated by the Financial Conduct Authority and some are not, depending on how the property will be used. Ask a broker which applies to you.

Mortgages

A standard mortgage can work if the lender can value the property, issue an offer and release funds before completion. That is a tight timetable. Some properties may not be acceptable to mainstream lenders at all, for example those without a working kitchen or bathroom, with a short lease, or of unusual construction. The longer timescale in a conditional auction can help mortgage buyers.

Before you bid

• Get a decision in principle (also called an agreement in principle) so you know roughly what a lender may offer. It is not a guarantee of a loan.
• Ask a broker early whether this particular property is likely to be acceptable, and how quickly funds could be released.
• Ask your solicitor to review the legal pack with the lender's requirements in mind.
• Have a backup plan in case the valuation is low or the offer is delayed.
• Bid only up to an amount you can fund in full, including costs.

If you cannot complete on time, you could lose your deposit and face further claims. Everyone's position is different, so check with a mortgage broker and a solicitor before you bid.