Bridging loan LTV explained
Bridging loan LTV is the ratio of the loan to the value of the property used as security. Most bridging lenders offer up to 70% to 75% LTV, but the actual amount depends on property type, condition, borrower profile, exit route, credit and lender criteria.
What LTV means in bridging finance
LTV (Loan to Value) is a key measure in bridging finance that shows the percentage of the property value being borrowed. It helps lenders understand their risk exposure if they need to sell the property. A lower LTV typically means less risk for the lender and may result in better terms for the borrower.
How property value is assessed
Lenders typically commission an independent valuation of the property to determine its value. This valuation is used to calculate the maximum amount they can lend based on their LTV policy. The valuation may be a desktop valuation or a full surveyor visit, depending on the property and lender criteria.
Maximum LTV by property type
Different property types may attract different LTV maximums depending on how easily they can be sold and their stability of value. Standard residential properties typically attract higher LTVs than specialist properties. Commercial or mixed-use properties may have lower LTVs subject to the property condition and marketability.
LTV on purchase price vs open market value
Lenders typically use the lower of the purchase price and the open market value for LTV calculation purposes. This protects the lender if the property is being purchased below market value. If the purchase price is higher than the valuation, the LTV will be calculated on the lower valuation figure.
How LTV affects rate
Higher LTVs typically carry higher interest rates because the lender has greater exposure if repayment issues arise. Lower LTVs may qualify for more competitive pricing. The exact relationship between LTV and rate depends on the lender and overall borrower profile.
Net loan vs gross loan at different LTVs
The gross loan is the total amount borrowed, while net loan is the amount received after fees are deducted. At higher LTVs, the impact of fees on net proceeds may be more significant. Understanding both figures helps borrowers assess the true cost and available capital from the facility.
FREQUENTLY ASKED
Frequently asked questions
Typically 70% to 75%, but the maximum depends on the property, borrower, exit route and lender criteria.
Lenders usually use the lower of purchase price and valuation for LTV purposes.
It may be possible in limited cases with additional security, strong exit or specialist lenders, but it is not standard.
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Results are indicative and depend on lender criteria, valuation, security, credit profile, exit route and full underwriting.
Results are indicative and depend on lender criteria, valuation, security, credit profile, exit route and full underwriting. Commercial finance may be unregulated. Some property finance can be regulated depending on borrower, property use and loan purpose.