Definition
LTV (Loan to Value) is the ratio of the purchase advance to the current or purchase price of the security property. In bridging finance, it measures day-one leverage — how much of the property’s value the lender is funding at the point of drawdown.
LTV is the governing metric for bridging and auction finance. For development deals, it is typically assessed on the current value of the land or property at acquisition, before development works increase the asset’s value. LTGDV measures leverage against the completed value; LTV measures it against the starting point.
Formula
LTV = Purchase Loan Amount ÷ Purchase or Current Value
LTV uses the purchase loan amount, not gross facility. This contrasts with LTGDV which uses gross facility. The metric measures day-one entry leverage only.
Day-one loan divided by purchase or current value equals LTV percentage.
Day-one Loan ÷ Purchase / Current Value = LTV %
Worked Example
Worked Example
Auction purchase. Residential property acquired for £450,000. Borrower requires £315,000 in bridging finance to complete within 28-day auction deadline.
70% LTV sits at the standard maximum for most bridging lenders. The borrower contributes 30% (£135,000) as a cash deposit. A formal valuation confirming market value at or above £450,000 supports this position.
How Brokers Use LTV
For bridging and auction submissions, LTV is the first metric lenders check. Brokers must confirm what value basis will be used — purchase price or RICS valuation — and ensure the required loan advance sits within the lender’s stated maximum.
For auction finance where there is no pre-auction valuation, most lenders accept the auction price as a proxy for current value if it is supported by comparable sales evidence. Submitting strong comparables pre-completion is standard practice for reducing valuation risk.
Where additional equity is tied up in the property (equity release from an existing asset), lenders will assess LTV across all borrowing secured on the same asset — not just the bridging facility.
How Lenders Assess LTV
Lenders apply LTV limits based on property type, location, exit route, and borrower profile. Residential assets in prime locations attract the highest LTV allowances; commercial, semi-commercial, and HMO properties are typically treated more conservatively.
At credit, lenders stress LTV by applying a haircut to the valuation — typically 10–15% downside — to model the position in a forced sale scenario. A 70% LTV at a stressed value of 85p in the pound still gives the lender a meaningful margin of safety. A 75% LTV with a contested valuation in a declining market may not.
Common Mistakes
- Using gross facility in the numerator. LTV uses the purchase loan advance only. Including fees and funded interest inflates the LTV figure and is not the metric lenders assess.
- Confusing LTV with LTGDV for development deals. On a bridge-to-develop, lenders assess both LTV (current/purchase value) and LTGDV (GDV) independently. Meeting LTV does not automatically satisfy the LTGDV constraint.
- Using an above-market purchase price as the value. If a borrower is paying above market value, lenders will use the RICS valuation, not the purchase price. Calculating LTV on an inflated purchase price masks the true day-one leverage position.
Frequently Asked Questions
Is LTV calculated on purchase price or current value?
Most lenders use the lower of purchase price and current market value assessed by a formal RICS valuation. For auction finance, where a formal valuation may not exist pre-purchase, lenders typically use the purchase price and commission a retrospective desk valuation or site visit.
What is the maximum LTV for bridging finance?
Standard first-charge bridging finance typically allows up to 70–75% LTV. Regulated bridging (where the security is or will be the borrower's primary residence) is generally capped at 70–75% due to FCA requirements. Unregulated lenders may occasionally stretch to 80% with strong exit evidence.
How does LTV relate to LTGDV for development bridge deals?
For a pure bridging facility with no development component, LTV is the primary metric. When development works are involved — even light refurbishment — lenders may assess both LTV (on current value) and LTGDV (on completed GDV). Each is assessed independently.
What value is used for commercial property LTV?
For commercial and semi-commercial property, LTV uses the current investment value or vacant possession value depending on the nature of the security. Lenders will specify which basis the RICS valuer should use. Vacant possession value is more conservative and produces a lower LTV.
Does LTV change if I add a second charge?
The combined LTV including all charges on a property is called CLTV (Combined Loan to Value). Second-charge lenders assess CLTV, not just their own loan. First-charge lenders may restrict or prohibit second charges in their facility terms.