Definition
LTGDV (Loan to Gross Development Value) is the ratio of a lender’s gross facility to the project’s Gross Development Value. It is the single most influential metric in development finance underwriting because it measures the lender’s exposure against the future value of the asset — the number the lender will ultimately be repaid from.
GDV is the aggregate estimated open market value of all completed units or the completed building once the development scheme is fully realised. It is assessed by an RICS-qualified valuer at the point of formal valuation, and most lenders require both a broker-submitted estimate and an independent formal appraisal before lending.
Formula
LTGDV = Gross Facility ÷ GDV
LTGDV uses gross facility (not net loan). Lenders always assess on gross facility; using net loan materially understates leverage.
Gross Facility divided by GDV equals LTGDV percentage.
Gross Facility ÷ GDV = LTGDV %
Worked Example
Worked Example
Residential development scheme, 8 units. Borrower seeking £1,500,000 in advances at 0.85% per month, 18 months, rolled interest. Arrangement fee 2%, exit fee 1%. GDV assessed at £3,000,000.
Compound monthly on advances
At 59.7%, this deal sits within most mainstream lenders' senior LTGDV range. A reduction in advances or a stronger GDV case would provide further headroom.
How Brokers Use LTGDV
Brokers model LTGDV before submission to assess which lenders will engage. Most maintain a hard LTGDV cap — commonly 60% for senior debt — and LTGDV is calculated on gross facility, not net advances. Presenting a deal with a net-loan-based LTGDV will be corrected immediately at credit committee and may undermine credibility.
Where a deal marginally exceeds the senior lender’s LTGDV limit, brokers should consider whether mezzanine debt is viable and how combined LTGDV across senior and mez tranches will appear to each lender. Presales are the most powerful lever: contracted sales reduce effective GDV risk without changing the calculated LTGDV, which is why experienced lenders assess presales separately.
How Lenders Assess LTGDV
Lenders do not treat LTGDV as a standalone pass/fail. A deal at 64% LTGDV with strong planning, an experienced developer, and anchor presales presents less risk than a deal at 58% LTGDV with outline planning and no track record. LTGDV is the starting point; the qualitative assessment follows.
At credit committee, lenders apply their own GDV stress — typically modelling a 10–20% downside to test LTGDV sensitivity. A project with a formal valuation close to the broker’s estimate, and with presales supporting the GDV, will survive stress modelling more comfortably than one with a speculative or aspirational GDV.
Common Mistakes
- Using net loan instead of gross facility. LTGDV is always on gross facility. Presenting on net loan produces a lower, misleading figure that lenders will recalculate immediately.
- Aspirational GDV estimates. A GDV that significantly exceeds comparable sales in the area creates risk that lenders will identify at the formal valuation stage. Discrepancies between broker estimates and formal valuations are a leading cause of deal collapse.
- Ignoring interest treatment in the facility.Rolled interest adds to gross facility and therefore increases LTGDV. A deal that passes at day one with retained interest may breach LTGDV limits once rolled interest is modelled over the full term.
Frequently Asked Questions
What is a typical LTGDV limit for development finance?
Most mainstream development lenders apply a 60–65% LTGDV cap. Some specialist lenders extend to 70–75% for low-risk projects with strong sponsors and presales. Mezzanine tranches can push combined LTGDV higher, but at materially higher rates.
Is LTGDV calculated on gross facility or net loan?
LTGDV uses gross facility — the total lender exposure including advances, arrangement fee, exit fee, and funded interest. Using the net loan amount understates leverage and would not reflect the lender's true risk position.
How does LTGDV relate to LTC?
LTGDV and LTC measure leverage from opposite directions. LTGDV compares the loan to the completed value (GDV); LTC compares the loan to total cost. A project can pass one test while failing the other. Lenders apply both independently.
What happens if GDV is contested at valuation?
If the RICS valuation returns a GDV materially below the broker's estimate, LTGDV worsens. Lenders model on the lower of the broker's estimate and the formal valuation. A contested GDV is one of the most common reasons for deal restructuring.
Can LTGDV be improved during a project?
Yes. Presales reduce effective GDV risk. Strong planning consents, anchor contracts, and demonstrable prior schemes improve lender comfort at the same LTGDV percentage. The metric is one dimension; sponsor quality and exit credibility are equally important.