Loan-to-Value Ratios in Bridging Finance Explained
Loan-to-value, or LTV, is one of the first numbers a bridging lender looks at. It affects how much you can borrow, the rate you are offered and how comfortable a lender feels about your case. Yet it is often misunderstood, particularly when interest is rolled up or more than one property is used as security.
This guide explains how LTV is worked out in bridging finance, why it matters and what you can do to put yourself in a stronger position.
What loan-to-value means
LTV compares the size of the loan with the value of the property securing it, shown as a percentage. The calculation is simple: divide the loan by the property value and multiply by 100.
For example, a £150,000 loan secured on a property valued at £200,000 has an LTV of 75%. The lower the percentage, the more equity sits between the loan and the property's value, and the lower the risk for the lender.
Why LTV matters to bridging lenders
Bridging loans are short term and are often repaid by selling or refinancing the property, so lenders lean heavily on the security. If the exit falls through, the property's value is what protects the loan. That is why LTV influences:
- How much you can borrow: every lender sets a maximum LTV, which varies with the property type, its condition and the type of charge.
- The rate you pay: interest is typically 0.4% to 1.5% per month, and lower-LTV cases tend to sit towards the cheaper end.
- How flexible the lender can be: more equity can make a lender more comfortable with unusual properties or tight timescales.
Gross LTV, net LTV and rolled-up interest
This is where many borrowers are caught out. With a bridging loan, interest is often retained or rolled up and paid at the end, and fees may be added to the loan. That means the amount you receive on day one (the net loan) is smaller than the amount you will owe (the gross loan).
Lenders usually set their maximum against the gross figure. So if you need a particular amount in your hand, the loan, interest and fees together must fit within the lender's limit. A longer term or higher rate increases the rolled-up interest and pushes the gross LTV up.
Our bridging loan calculator shows your LTV alongside the interest and fees, so you can see how changing the term or rate affects the total.
How the property's value is decided
The value used is the lender's valuation, not the asking price or your own estimate. A surveyor instructed by the lender will assess the property, and if their figure comes in lower than expected, the maximum loan falls with it.
Some lenders also consider what the property is worth once refurbishment work is complete, which can matter if you are improving a property before refinancing. For heavier projects, our construction finance page explains how lending is assessed against costs and finished value.
Practical ways to improve your LTV
- Increase your deposit: putting more of your own money in reduces the loan and the LTV.
- Offer additional security: a charge over another property you own can lower the overall LTV across both.
- Choose a realistic term: a shorter term means less rolled-up interest, provided it still gives you time to exit.
- Consider serviced interest: paying interest monthly rather than rolling it up keeps the gross loan smaller.
- Prepare for the valuation: make sure the surveyor has access and relevant information, such as planning documents or recent works.
Reducing debt elsewhere will not change the LTV on the property itself, but it can strengthen the overall application.
First and second charge lending
If you already have a mortgage on the property, a bridging loan may be taken as a second charge. In that case the lender looks at the combined LTV, adding the existing mortgage and the new loan together. If the property has no existing borrowing, the bridging loan takes a first charge, which lenders generally view as lower risk. Find out more on our property bridging loans page.
Frequently asked questions
How do I calculate loan-to-value?
Divide the loan amount by the property's value and multiply by 100. A £150,000 loan on a £200,000 property is 75% LTV.
Does rolled-up interest affect my LTV?
Yes. Lenders usually measure LTV on the gross loan, including rolled-up interest and any fees added, so the amount you receive is less than the amount counted against the limit.
Can I borrow more by using another property as security?
Often, yes. Offering a charge over a second property can reduce the overall LTV and may allow a larger loan, subject to the lender's valuation of both.
What happens if the valuation is lower than expected?
The maximum loan is based on the lender's valuation, so a lower figure reduces how much you can borrow. You may need to add funds, offer extra security or renegotiate the purchase price.
Every case is different, so the best next step is a quick conversation about your plans. Get in touch or call our specialist Adam at 07973 197535 for a no-obligation chat.