Worked Example: Calculating the True Cost of a £120,000 Auction Lot (Every Fee, Tax and Finance Cost, Line by Line)

What does a £120,000 auction property really cost?

The hammer price is only the starting point. Once you include the buyer's premium, Stamp Duty Land Tax (SDLT), legal fees, valuation, bridging finance, refurbishment and holding costs, the total investment can be substantially higher.

In the worked example below, a £120,000 residential auction property costs approximately £159,404 all-in under the assumptions used. That is around £39,404, or 32.8%, above the hammer price.

The example follows a two-bedroom terraced house in a Midlands town, purchased at auction with bridging finance, lightly refurbished and then considered for a buy-to-let refinance.

Every figure is shown separately so you can see where the money goes, how much cash you need and what happens when you reach the refinance stage.

This is an auction finance calculator-style model you can adapt to your own purchase. It is not a lender quotation, tax calculation for your personal circumstances or guaranteed investment return.

This guide uses indicative market information available at November 2026. The bridging interest assumption is based on the 0.81% monthly average reported by Bridging Trends for Q2 2026. Actual rates, fees, tax and lender criteria will vary.

"The hammer price is the headline; the cost model is the story. Buyers who read only the headline buy the story they did not price."

— Deji Nehan, Auction Demystified: Unlocking Auction Success

Key takeaways

• A £120,000 auction purchase can cost approximately £159,404 after the assumed acquisition, finance, refurbishment and holding costs.
• The 10% auction deposit is normally part of the purchase price, not an additional cost.
• A buyer's premium, SDLT and legal costs can add thousands before refurbishment begins.
• A £84,000 bridging facility represents 70% of the £120,000 purchase price in this example.
• At an assumed monthly interest rate of 0.81% over nine months, interest totals £6,123.60 if calculated on a constant £84,000 balance.
• The refinance calculation must account for the outstanding bridge, fees and the new lender's affordability and valuation requirements.
• The deal should be stress-tested against lower end values, higher refurbishment costs and a longer finance term before bidding.

1. The auction costs calculator mindset: hammer price versus true cost

One of the most common mistakes auction buyers make is treating the hammer price as the amount they need to budget for.

It is not.

The hammer price is the agreed purchase price at auction. It does not include the other costs of acquiring, funding, improving or holding the property.

A realistic auction costs calculator should include:

1. Purchase price and deposit.
2. Buyer's premium and auction administration fees.
3. SDLT or the relevant property transaction tax.
4. Solicitor's fees and searches.
5. Valuation and survey costs.
6. Bridging arrangement fees and interest.
7. Lender legal and exit fees.
8. Refurbishment and contingency.
9. Insurance and holding costs.
10. Refinance or disposal costs.

The professional discipline is to calculate the total before bidding. Your maximum bid should be determined by the economics of the entire project, not by the catalogue guide price.

The property and deal assumptions

For this example, assume the following:

These assumptions are deliberately specific so the calculation can be followed. A real lender may calculate its loan-to-value ratio against its own valuation rather than the hammer price. It may also apply different fees, interest arrangements and lending criteria.

The SDLT calculation assumes a qualifying additional residential property purchase in England, with the higher rates applying. It does not assume the buyer qualifies for an exemption or refund.

2. Stage one: the deposit and auction-day costs

At a traditional unconditional auction, the deposit is commonly 10% of the hammer price, although the contract and auctioneer's terms must always be checked.

On a £120,000 purchase:

[
£120,000 \times 10% = £12,000
]

The buyer therefore needs £12,000 available for the deposit.

The important distinction is that this deposit is part of the £120,000 purchase price. It is not another £12,000 added to the property's cost.

The remaining purchase balance is:

[
£120,000 - £12,000 = £108,000
]

The buyer must arrange to pay that balance by the contractual completion date.

The buyer's premium

For this example, assume the auctioneer charges a buyer's premium equivalent to 1.5% of the hammer price, including any applicable VAT.

[
£120,000 \times 1.5% = £1,800
]

The premium is an additional acquisition cost. It does not reduce the amount owed to the seller.

Always check the auction agreement. Some auctioneers charge a fixed buyer's fee, some charge a percentage, and VAT may be added depending on the wording.

Auction-day cash requirement

This is the immediate cash requirement under the example assumptions. It is not the full amount of cash needed to complete the purchase.

A buyer should also check the payment deadlines and whether the deposit and premium must be paid through separate payment processes.

3. Stage two: SDLT with the additional-property surcharge

Stamp Duty Land Tax is a major part of the acquisition calculation for buyers purchasing residential property in England and Northern Ireland.

The amount depends on the purchase price, transaction date, property type and buyer's circumstances.

For this example, assume the buyer already owns another residential property and the purchase qualifies for the higher rates for additional dwellings.

Under the rates applying from 1 April 2025, the higher-rate SDLT charge on the first £125,000 of consideration is 5%.

For a £120,000 purchase:

[
£120,000 \times 5% = £6,000
]

<badge color="success">Illustrative SDLT: £6,000</badge>

Why is the SDLT £6,000?

The standard residential SDLT rate on a single property purchase is zero up to £125,000. However, the additional-property rates apply a 5% rate to the first £125,000 where the relevant conditions are met.

Because the full purchase price is £120,000, the calculation is:

This is an illustrative calculation for a qualifying additional residential property purchase. It is not a universal SDLT figure for every buyer.

Does buying through an SPV avoid the surcharge?

No. Buying through a limited company does not automatically avoid the higher rates for additional residential properties. Corporate purchases have their own SDLT rules, and the precise treatment depends on the transaction and any applicable relief or exception.

The buyer should not assume that using an SPV makes the additional-property tax disappear.

What if the buyer is non-UK resident?

A separate 2% non-UK resident surcharge may apply to certain residential purchases in England and Northern Ireland. It can apply in addition to other relevant SDLT rates.

That could materially increase the tax bill. The example above does not include it.

What if the property is mixed-use or commercial?

Different SDLT rates and rules apply to non-residential and mixed-use transactions.

Before relying on any estimate, use the GOV.UK SDLT calculator and review the official residential property rates and non-residential and mixed-use rates.

4. Stage three: legal, valuation and professional fees

The next stage is to budget for the professional work needed to complete the purchase and prepare the property for its intended use.

The example uses the following allowances:

These are planning allowances, not fixed market prices.

The actual legal bill depends on the property, title, lease arrangements, lender requirements and complexity of the transaction. An auction property with unusual title entries, missing documents or a complicated tenancy may require substantially more legal work.

Why legal pack review matters

A buyer should have the auction legal pack reviewed before bidding.

The review should identify issues such as:

• Title restrictions and charges.
• Leasehold obligations.
• Special conditions of sale.
• Additional seller costs.
• Tenancy and occupation arrangements.
• Planning and building regulations concerns.
• Search results and outstanding liabilities.
• Completion deadlines.

A relatively small legal review cost can help identify a much larger financial risk before the buyer becomes contractually committed.

Do not forget lender legal costs

A bridging lender may instruct its own solicitor or require the borrower to contribute to lender legal expenses.

For this example, allow £1,200 for lender legal costs.

This is separate from the buyer's own conveyancing costs and is included in the finance section below.

5. Stage four: calculating bridging finance costs

This is where the auction finance calculator becomes particularly important.

Assume the buyer arranges a bridging facility equal to 70% of the £120,000 purchase price.

[
£120,000 \times 70% = £84,000
]

The gross bridging facility is therefore £84,000.

The remaining purchase price must be funded by the buyer:

[
£120,000 - £84,000 = £36,000
]

That £36,000 includes the £12,000 deposit and the £24,000 balance of the purchase price not covered by the bridge.

What interest rate should you use?

For market context, Bridging Trends reported an average monthly bridging interest rate of 0.81% for Q2 2026.

That is a market average across contributing firms, not a rate that every borrower can obtain. Individual pricing depends on the lender, property, loan-to-value, borrower, security and exit strategy.

For this worked example, use 0.81% per month.

Calculate the monthly interest

[
£84,000 \times 0.81% = £680.40
]

The monthly interest cost is £680.40, assuming the full £84,000 remains outstanding and interest is calculated on that balance.

Calculate nine months of interest

[
£680.40 \times 9 = £6,123.60
]

The total interest over nine months is therefore £6,123.60.

This assumes monthly serviced interest on a constant loan balance. It does not include compounding or additional borrowing.

Arrangement fee

Assume an arrangement fee of 1.5% of the gross loan:

[
£84,000 \times 1.5% = £1,260
]

Exit fee

Assume an exit fee of 0.5% of the original loan:

[
£84,000 \times 0.5% = £420
]

Not every lender charges an exit fee. Some charge a fixed amount, some calculate it as a percentage and some have no separate exit fee.

Lender legal and valuation costs

For the example, use:

• Lender legal costs: £1,200.
• Lender valuation allowance: £600.

The valuation allowance is shown separately from the buyer's own survey and valuation allowance because the lender may require its own valuation process.

Complete bridging finance cost table

The £84,000 loan principal is not itself a finance cost. It is borrowed money that must be repaid. The £9,603.60 is the assumed cost of arranging and using that facility under this example.

Important: retained, rolled-up or serviced interest

The example assumes interest is serviced monthly.

Bridging lenders may instead offer retained or rolled-up interest:

• Serviced interest: The borrower pays interest monthly.
• Retained interest: The lender deducts an agreed interest allowance from the advance at the start.
• Rolled-up interest: Interest is added to the outstanding loan and paid at redemption.

These structures affect the amount of cash received at completion and the redemption balance.

Do not add the same interest twice. If the lender retains interest from the advance, include it in the funding calculation and do not also treat it as a separate monthly payment. If interest is rolled up, include the accumulated amount in the redemption figure.

6. Stage five: refurbishment and holding costs

The property is assumed to need light refurbishment before it can be refinanced.

The buyer budgets:

The £3,000 contingency is 20% of the £15,000 works budget.

That allowance is intended to provide some protection against unexpected repairs and cost increases. It is not a guarantee that the project will remain within budget.

What might the £15,000 refurbishment include?

Depending on the property's condition, the works could cover:

• Redecoration and basic finishing.
• Kitchen improvements.
• Bathroom improvements.
• Flooring and internal repairs.
• Minor plumbing and electrical work.
• General clearance and preparation.

It is not a structural refurbishment budget. Major roof repairs, underpinning, extensive rewiring or significant structural alterations could increase the cost substantially.

Why holding costs matter

Even a straightforward refurbishment takes time.

During the project, the owner may need to pay for insurance, utilities, security, council tax where applicable, maintenance and other property-related expenses.

If the bridge remains outstanding for longer than expected, the interest bill also increases.

A realistic model should therefore include both the cost of the works and the cost of owning the property while those works are completed.

7. The complete cost table: what does the £120,000 property really cost?

Now combine every line.

<box border radius="lg" padding={3} gap={2}>
<text color="secondary" weight="medium" size="sm">Illustrative total investment</text>
<title size="2xl" color="success" tabularNums>£159,403.60</title>
<row justify="between">
<text color="secondary" size="sm">Hammer price</text>
**£120,000**
</row>
<row justify="between">
<text color="secondary" size="sm">Additional costs</text>
**£39,403.60**
</row>
<divider color="subtle"/>
<row justify="between">
<text color="secondary" size="sm">Increase over hammer price</text>
**32.8%**
</row>
</box>

The example demonstrates why buyers should not judge an auction opportunity solely by its guide price or hammer price.

The total cost is approximately £39,404 higher than the purchase price.

What does the buyer actually need in cash?

The deposit is part of the purchase price, but the buyer still needs enough cash to cover the amount not funded by the bridge and the additional costs.

Assuming the lender advances the full £84,000 towards the purchase:

This is a simplified cash-flow illustration. The timing of payments matters: some costs are paid before auction, some on completion, some during refurbishment and some at redemption.

The model assumes the full £84,000 facility is available for the purchase and that the borrower pays the interest monthly. A lender that deducts fees or retains interest from the advance would produce a different net completion figure and require a different cash contribution.

8. The refinance calculation: what happens at the end of the bridge?

The next question is whether the buyer can refinance the property after refurbishment.

Assume the completed property is valued at £165,000 and a buy-to-let lender is prepared to offer 75% loan-to-value.

The illustrative refinance amount is:

[
£165,000 \times 75% = £123,750
]

The new mortgage would therefore be £123,750, assuming the lender accepts the valuation and the borrower meets all its other criteria.

Redeeming the bridging facility

The original bridge is £84,000.

The assumed exit fee is £420.

Therefore:

The monthly interest has already been paid during the nine-month term in this example, so it is not added again to the redemption balance.

What remains after refinancing?

[
£123,750 - £84,420 = £39,330
]

The refinance could therefore release approximately £39,330 before new mortgage fees, legal costs and any other deductions.

This is not a guaranteed cash profit. It is the gross amount remaining after the assumed bridge redemption.

The borrower still has a new mortgage secured against the property, and the refinance is subject to the new lender's valuation, rental stress testing, borrower assessment, legal checks and product criteria.

How much equity remains in the property?

At a £165,000 valuation, a £123,750 mortgage represents 75% loan-to-value.

The remaining equity is:

[
£165,000 - £123,750 = £41,250
]

That £41,250 is the property's equity before allowing for future sale costs, mortgage redemption charges or changes in value.

It is important to distinguish this from the original cash invested. A refinance can release some capital, but it does not erase the project's acquisition and refurbishment costs.

Does the project make a profit?

The end value is £165,000 and the total project cost is £159,403.60.

The difference is:

[
£165,000 - £159,403.60 = £5,596.40
]

That is an indicative uplift of £5,596.40 before any costs not included in the model, such as new mortgage arrangement fees, future sale costs, tax on any eventual disposal or unexpected works.

The example therefore illustrates an important point: a project can produce a higher end valuation and still have a relatively narrow margin after all costs.

A buyer should not mistake the £39,330 refinance balance for a £39,330 investment profit.

9. Rental income: does the buy-to-let exit work?

The example assumes the refurbished property can achieve rent of £850 per month.

Annual gross rent would be:

[
£850 \times 12 = £10,200
]

The gross rental yield against the assumed £165,000 end value is:

[
\frac{£10,200}{£165,000} \times 100 = 6.18%
]

<badge color="success">Illustrative gross yield: 6.18%</badge>

This is a gross yield, not the investor's net return.

The landlord still needs to account for:

• Mortgage interest and repayments.
• Letting and management fees.
• Landlord insurance.
• Repairs and maintenance.
• Periods without a tenant.
• Compliance and licensing costs.
• Service charges or ground rent, where applicable.
• Tax on rental profits.

Will the rent support a £123,750 mortgage?

Not necessarily.

A buy-to-let lender will usually assess rental income against its interest coverage requirements and applicable stress rate. The calculation can vary by lender, product, borrower tax status and property type.

The lender may also apply a maximum loan-to-value limit and other underwriting conditions.

The £123,750 refinance is therefore a scenario to test, not an amount the buyer should assume will be available.

Before bidding, ask your broker to test the proposed rent against actual lender criteria. If the rental income cannot support the required loan, the borrower may need to inject additional capital or choose another exit.

10. Sensitivity analysis: what happens when the assumptions change?

A deal that works only when every assumption is achieved exactly is a fragile deal.

Professional investors test what happens when the end value falls, the refurbishment budget rises or the bridging term becomes longer.

The following examples show how individual changes affect the base case.

A. The end value is 10% lower

Base end value: £165,000.

A 10% reduction gives:

[
£165,000 \times 90% = £148,500
]

At 75% loan-to-value:

[
£148,500 \times 75% = £111,375
]

After repaying the assumed £84,420 bridge redemption:

[
£111,375 - £84,420 = £26,955
]

The refinance balance remaining falls from £39,330 to £26,955.

The buyer may still be able to refinance, but the capital released is substantially lower.

B. Refurbishment costs rise by 20%

A 20% increase on the £15,000 works budget adds £3,000.

The refurbishment cost becomes £18,000 rather than £15,000.

The total project cost rises from £159,403.60 to £162,403.60, assuming the contingency is not also increased.

The margin against the £165,000 end value falls to £2,596.40.

C. The bridge runs for 12 months instead of nine

At £680.40 per month, three additional months of interest cost:

[
£680.40 \times 3 = £2,041.20
]

Total interest over 12 months becomes:

[
£680.40 \times 12 = £8,164.80
]

The project cost rises by £2,041.20 before any extension fee or other lender charges.

Sensitivity summary

The message is straightforward: a lower valuation, cost overrun or delayed refinance can materially reduce the money available to the investor.

The most dangerous situation is when several adverse changes happen together. That is why contingency, realistic valuations and a time buffer should be built into the original plan.

11. Scaling the model: what changes on a £250,000 auction lot?

The same calculation method applies to a larger purchase, but the figures do not simply double.

Some costs scale with the purchase price, while others are fixed or depend on the complexity of the property.

For example:

An illustrative SDLT comparison

Assume the buyer is acquiring an additional residential property in England and the higher rates apply.

At a £250,000 purchase price, the illustrative higher-rate SDLT calculation is:

• First £125,000 at 5% = £6,250.
• Next £125,000 at 7% = £8,750.

Total:

[
£6,250 + £8,750 = £15,000
]

That is £9,000 more SDLT than the £6,000 in the £120,000 example.

This demonstrates why the tax line must be recalculated for each property rather than copied as a percentage from a previous deal.

The correct SDLT treatment still depends on the buyer and transaction. Use the official calculator before committing.

12. How to build your own auction finance calculator

You can adapt the model above to any property by entering your own assumptions.

At a minimum, your calculator should have the following inputs:

The key calculations

Deposit

[
\text{Deposit} = \text{Hammer Price} \times \text{Deposit Percentage}
]

Loan amount

[
\text{Gross Loan} = \text{Purchase Price} \times \text{Assumed LTV}
]

Monthly serviced interest

[
\text{Monthly Interest} = \text{Outstanding Loan} \times \text{Monthly Rate}
]

Total interest on a constant balance

[
\text{Total Interest} = \text{Monthly Interest} \times \text{Number of Months}
]

Refinance amount

[
\text{New Mortgage} = \text{Accepted End Value} \times \text{New LTV}
]

Gross refinance balance after bridge redemption

[
\text{Balance} = \text{New Mortgage} - \text{Bridge Redemption}
]

Gross rental yield

[
\text{Gross Yield} =
\frac{\text{Annual Rent}}{\text{Property Value}} \times 100
]

These formulas provide a starting point. Your actual loan structure may require a more detailed calculation where interest is retained or rolled up, fees are added to the facility or the loan balance changes during the term.

13. How Auction360 can help assess the numbers before you bid

A property can look attractive at £120,000 and still fail once the full cost of acquisition, finance and refurbishment is considered.

Auction360's Auction Risk Analysis service is designed to help buyers examine the risks and financial assumptions associated with a specific auction lot.

The Auction Finance service explains funding options for auction purchases, including the role of specialist finance where a conventional mortgage may not fit the property's condition or completion timetable.

For buyers who want to understand their funding position before bidding, the Pre-Auction Approval service provides a starting point for assessing finance requirements.

These services should form part of a wider process that includes independent legal advice, appropriate property inspections, realistic cost estimates and a properly evidenced exit strategy.

The purpose is not simply to find a lender willing to advance money. It is to establish whether the purchase can be completed, improved and refinanced or sold on terms that make commercial sense.

As explained in Chapter 9 of Auction Demystified: Unlocking Auction Success, a cost model is most useful when it is completed before bidding, not after the buyer has committed to the purchase.

Frequently asked questions

What is the true cost of buying a property at auction?

The true cost includes the hammer price plus the buyer's premium, SDLT or other property transaction tax, legal fees, searches, valuation, finance costs, refurbishment and holding expenses.

In this worked example, the total is £159,403.60 against a £120,000 hammer price. That is approximately 32.8% higher than the purchase price.

The actual amount will depend on the property, buyer and funding arrangement.

How much deposit do I need at auction?

A traditional unconditional auction commonly requires a 10% deposit, although the contract must be checked.

On a £120,000 purchase, 10% is £12,000.

The deposit is part of the purchase price, not an additional acquisition cost. You should also budget for the buyer's premium and any other auction-day fees.

How much SDLT do I pay on a £120,000 auction property?

If the purchase qualifies for the higher rates for additional residential properties in England, the illustrative SDLT at the rates applying from 1 April 2025 is £6,000.

The actual tax depends on the buyer's circumstances, transaction date and whether any relief or surcharge applies. A separate non-UK resident surcharge may also be relevant.

Use the GOV.UK SDLT calculator to check your position.

Does buying through a limited company avoid the SDLT surcharge?

No. A limited company does not automatically avoid the higher rates for additional residential property purchases.

Corporate purchases have additional rules, and the correct treatment should be checked for the specific transaction.

What finance costs should I expect on an auction bridging loan?

Potential costs include:

• Arrangement fee.
• Monthly interest.
• Valuation.
• Lender legal fees.
• Exit fee, if applicable.
• Extension fees, if the loan runs beyond the agreed term.

In this example, the assumed total finance cost is £9,603.60 over nine months, including interest, arrangement fee, exit fee, lender legal costs and lender valuation.

Actual costs depend on the lender and facility structure.

What was the average bridging interest rate in Q2 2026?

Bridging Trends reported an average monthly interest rate of 0.81% for Q2 2026.

This is a market average across contributing firms, not a guaranteed rate or an indication that every borrower will qualify for that pricing.

Is the auction deposit financeable?

The deposit is normally expected to be available in cleared funds under the auction contract.

Some specialist funding arrangements may assist with particular deposit or cash-flow requirements, but these must be agreed in advance. Do not assume that a lender will reimburse or advance the deposit after you have won the auction.

What happens if refurbishment costs overrun?

An overrun increases the amount of cash required and may reduce the project's margin.

If the works also delay the refinance, additional bridging interest and possibly extension fees may arise.

This is why a realistic contingency and a credible works timetable should be included before bidding.

What happens if the refinance valuation is lower than expected?

A lower valuation can reduce the amount a new lender is prepared to advance.

In this example, a 10% reduction in the expected end value reduces the illustrative refinance balance after bridge redemption from £39,330 to £26,955.

If the new loan is insufficient to repay the bridge, the borrower may need to contribute additional funds or pursue another exit.

How do I know whether the numbers work before bidding?

Build a complete cost model using the actual auction terms, your SDLT position, legal estimates, lender terms, refurbishment quotations and realistic end value.

Then test the model against lower valuations, higher costs and a longer finance term.

Auction360's Auction Risk Analysis service is a relevant starting point for assessing the financial and transaction risks of a specific lot.

Final thoughts: calculate the investment, not just the bid

A £120,000 auction property is not necessarily a £120,000 investment.

Once the buyer's premium, SDLT, professional fees, bridging finance, refurbishment and holding costs are included, the total commitment in this worked example rises to approximately £159,404.

The deposit is important because it determines how much cash must be available on auction day. But the bigger question is whether you can fund the full purchase, complete the works and repay the bridging facility through a realistic sale or refinance.

The refinance calculation matters just as much as the acquisition calculation. A higher end valuation does not guarantee that a buy-to-let lender will advance the amount you want, and the money released through refinancing is borrowed capital, not automatically investment profit.

The best auction buyers do not wait until completion to discover the real cost of a property. They calculate every line before bidding, stress-test the assumptions and walk away when the numbers no longer make sense.

The hammer price wins the property. The cost model tells you whether you should buy it.

About the author

Deji Nehan is the author of Auction Demystified: Unlocking Auction Success, with more than 15 years' experience in property auctions and finance. He is the founder of Auction360, a UK auction and bridging finance platform.

Learn more about the book at auction360.co.uk/book.

Disclaimer

This article is for general educational purposes and does not constitute tax, legal, mortgage, investment or financial advice. All figures are illustrative and should not be relied upon as lender quotations, tax calculations or guaranteed investment returns. SDLT and other property taxes depend on the transaction and the buyer's circumstances. Obtain professional advice before bidding or arranging finance.

Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured against it.