When it comes to bridging finance or short-term property funding, two terms are often thrown around – Loan-to-Value (LTV) and Loan-to-Cost (LTC). While they’re both crucial in assessing how much you can borrow, many developers and investors either confuse them or apply them incorrectly.
Making the wrong assumptions around LTV or LTC can lead to underfunded deals, lender rejections, or avoidable delays. In this guide, we unpack the most frequent borrower mistakes and show you how to avoid them.
1. Confusing LTV and LTC
The most common issue is assuming that LTV and LTC are interchangeable. They’re not.
- LTV is the loan amount compared to the current market value of the property.
- LTC is the loan compared to the total project cost – including purchase, refurb, and fees.
Fix: Always clarify which metric the lender is using. For heavy refurb projects, LTC is often more relevant than LTV.
2. Overestimating Property Value (for LTV)
Some borrowers base their LTV on the post-refurb or resale value (GDV), not the current market value. But most lenders assess LTV against the value today, not tomorrow.
Fix: Use independent RICS valuations or comparables. Don’t base loan estimates on future value unless you’re applying for a GDV-based facility.
3. Ignoring Soft Costs in LTC Calculations
Borrowers often calculate total project cost using just purchase + build. But lenders may expect you to include:
- Professional fees (architects, planning consultants)
- Legal and stamp duty costs
- Contingency buffer (usually 5-10%)
Fix: Present a full cost breakdown when calculating LTC. It shows preparedness and credibility.
4. Assuming Below-Market Purchases Justify Higher Loans
Buying below market value (e.g. at auction) doesn’t always mean you’ll get a higher loan. Some lenders lend on purchase price, not market value – especially if it’s not arm’s length.
Fix: Don’t assume discounts equal leverage. Ask the lender if they base LTV on OMV or purchase price.
5. Relying on Maximum LTV/LTC Without a Solid Exit Plan
Even if your numbers stack up on paper, lenders won’t fund you at high leverage if your exit isn’t realistic. A rushed or vague exit strategy can kill the deal.
Fix: Provide a clear, viable plan – whether it’s sale, refinance, or rental – with supporting evidence.
6. Not Stress Testing Their Own Figures
Many borrowers pitch numbers based on best-case scenarios. But lenders stress test deals for delays, cost overruns, or sale fall-throughs.
Fix: Run your numbers through a conservative lens. Account for delays, partial sales, or refinancing delays.
Final Thoughts: Avoiding These Errors Saves Time and Builds Trust
Getting bridging finance is not just about the asset — it’s about how well you understand and present the numbers behind it. Misunderstanding LTV and LTC can delay or derail deals that might otherwise be fundable.
By learning how lenders assess these metrics, and presenting realistic, well-supported numbers, you position yourself as a credible borrower — and significantly improve your chances of approval.