Bridging Loans LTV – What does Loan-to-Value mean?
What is LTV (Loan-to-value)?
LTV is the ratio of total borrowing to the total property value - the lower the LTV, the lower the interest rate paid on the loan.
LTVs can vary and are expressed as a higher or lower percentage based on the security of a property or asset – though, typically, LTVs can be up to 80% for both residential and commercial property (even higher if multiple securities are offered)
Ultimately, the LTV indicates how much you will be able to borrow for whatever purposes you wish to use the bridge loan. This could be; property development, refurbishment or “bridging the gap” between the buying and selling of a residential property.
How is Loan-to-Value calculated?
LTV is calculated as a percentage – the loan amount divided by the appraised property or assets value.
LTV percentages, from a lender’s perspective, are about mitigating risk and exposure on their end. Therefore, lenders will consider several factors when determining this percentage:
- What you paid for the property or its current market value.
- Appraised value from the lender’s valuation
- Stability and desirability of an asset – is the security value secure enough? Will it retain its value?
- Number of securities offered; multiple properties, for instance.
- The Gross Development Value (GDV) - if you’re securing bridge finance for a property project or development, then a lender may consider the projected value of a property once work is completed.
Bridge loan calculator
Bridging loan calculators simplifies determining if bridging finance is suitable for you. Using our free bridge loan calculator, you can get an indicative quote and assistance in your initial research.
The calculator can help you understand the LTV percentage you can secure a loan at for bridging finance purposes.
Additionally, it is helpful to seek out a bridging advisor or specialist to assist you further if you decide to go ahead with bridging finance and wish to expedite the entire process.
How does LTV affect a bridging loan’s interest rate?
A bridge loan LTV is generally based on the overall risk associated with providing finance to the borrower.
As the LTV increases, so do the interest rates for bridging loans.
When the lender sees a low level of risk, they will offer a lower LTV percentage, meaning lower interest rates. On the other hand, when the lender sees a higher level of risk, the lender will charge a higher interest rate.
What LTV percentage can I get?
LTVs can range. However, with the help of a specialist broker, you can get a favourable LTV on a bridge loan for whatever purpose you need it for.
It is usual for an LTV to be up to 80%, but this percentage can vary based on your circumstances, purposes for the loan and the security offered.
It is possible to secure 100% LTV on a bridging loan. Still, these are scenarios where multiple assets and properties are put up as collateral – and are stable and secure, presenting less risk to the lender.
Additionally, lenders are more confident that payments will be made consistently during the loan term when the LTV is lower. Consequently, it may be most beneficial on overall costs to secure a lower percentage LTV for your purposes.
How can I secure a favourable LTV for a bridge loan?
The lenders we work with are eager to lend to individuals at various LTVs, whether you require finance for house purchases, commercial properties, or property projects and developments with a more niche and specialist approach.
We can bring your case to a suitable lender, find you a favourable rate, and speed up the bridging finance process from application to cash in your account.
