Auction and Deposit Funding: Closing the Gap in Days

At auction there is no cooling off and no finance clause. The hammer falls, you sign, and the deposit is payable immediately with settlement typically six weeks later. If your equity is sitting in another property or a business asset, the constraint is not whether you can afford the purchase — it is whether the cash arrives in time.

Two distinct funding needs

The deposit — usually 5 to 10 per cent, payable on the day. Fast, relatively small, secured against equity you already hold.

The balance at settlement — the larger requirement, needed on a fixed date. This is where most deals come unstuck, because a bank approval that "should be fine" is not a settlement guarantee.

Both can be funded by short-term facilities secured over property: a first mortgage where the security is unencumbered, a second mortgage or caveat where there is an existing loan.

Sort the funding before you bid

The most useful thing you can do is get an indicative approval before auction day, not after it. That means the lender has seen your security, formed a view on value and LVR, and told you what it will lend and how fast. You then bid knowing your ceiling, and if you win, the paperwork is already half done.

A conditional answer takes minutes and does not affect your credit score. There is no reason to wait until you have signed a contract.

What we look at

• The security you are offering — value, existing debt, and whether the first mortgagee will consent to a second.
• The purchase — the property, the price and the settlement date.
• The exit — bank refinance after settlement, sale of another asset, or a defined cash event, with a date.

Timing, realistically

Where the security is clean and the exit is clear, deposit funding can settle in a few days. A larger settlement facility takes a little longer because of the valuation and the mortgage documents. Two things create nearly all delays: waiting on a first mortgagee consent, and waiting on a discharge from an existing lender. Start both the day you accept terms.

Cost against consequence

Short-term funding costs more than a term bank loan. The comparison that matters is not rate against rate, it is cost against consequence. Failing to settle an auction purchase can mean forfeiting a deposit of tens of thousands of dollars, plus exposure to the vendor for any loss on re-sale. A few months of interest is a defined, smaller number. Ask for every cost in writing — establishment, legals, valuation, and any exit fee — and compare the total against what is at risk.

Practical checklist for auction day

• Indicative approval in hand, with a maximum bid you have tested against it.
• Deposit funds available or committed in writing.
• Solicitor briefed and contract reviewed before the auction.
• Settlement facility scoped, with valuation ordered the moment you win.
• Exit named and dated, with a fallback if it slips.

Send us the property you are bidding on, the security you can offer and your settlement date. We will come back with an indicative rate, LVR and timeline before auction day.