Bridging Loan LTV Explained: Gross vs Net and Valuations

Short answer: loan-to-value (LTV) is the loan expressed as a percentage of the property's value, and in bridging it decides how much you can borrow. The figure that matters is the lender's own valuation, and whether the LTV limit is measured on the gross loan (including fees and retained interest) or on the net cash you actually receive.

Many people see a maximum LTV in an advert and assume it tells them how much money will land in their solicitor's account. In practice the valuation can come in lower than the price you agreed, fees and interest can be taken from the advance, and some property types attract lower limits. Understanding those moving parts early helps you plan your deposit, your exit and your timetable.

For example, if you are weighing up a 75 percent LTV bridging loan, the maximum is a ceiling rather than a promise: the lender decides the final amount after valuing the property and reviewing the deal. This guide explains how LTV works in bridging, with a worked example, so you can read any offer with confidence. It is general information, not advice.

How is LTV calculated on a bridging loan?

The basic sum is simple: divide the loan by the property value and multiply by 100. A £300,000 loan against a property valued at £400,000 is 75% LTV. The complications come from two questions: which loan figure, and which value.

On the loan side, bridging lenders often set limits on the gross loan, which is the total debt including any arrangement fee and interest that has been added or retained. The net loan is the cash released to you after those deductions. On the value side, the lender relies on its own instructed valuation, not the asking price, the purchase price or an online estimate.

What does gross versus net look like in practice?

Here is a purely illustrative example. The numbers are invented to show the arithmetic and are not a quote or a typical rate.

Gross loan

Property valuation: £400,000
Maximum gross LTV: 75%
Maximum gross loan: £300,000

Deductions taken from the advance

Arrangement fee (illustrative): £6,000
Retained interest for the term (illustrative): £27,000
Total deducted: £33,000

Net loan

Cash released: £267,000
Net LTV: roughly 67%
Effect: you would need around £133,000 from other sources on a £400,000 purchase, before your own costs and any tax.

The gap between gross and net is why two offers with the same headline LTV can release very different sums. Always ask for the net advance in pounds.

Why might the valuation differ from the price you agreed?

A lender's valuer reports on the property's value for lending purposes. Valuers who are members of the Royal Institution of Chartered Surveyors must follow RICS Valuation – Global Standards, known as the Red Book, which sets mandatory practices for valuation work. A valuation can come in below the agreed price for many reasons: comparable sales, condition, an unusual construction type, short leases, or a property that would be difficult to sell quickly.

Some lenders also ask valuers to comment on what the property might achieve on a quicker sale, because a bridging lender's main concern is being repaid at the end of a short term. Ask whether that figure will be used in your case, as it can reduce the amount offered.

What else affects the LTV a lender will offer?

Charge position: a first charge sits ahead of other lenders; a second charge sits behind an existing mortgage, so lenders usually look at the combined borrowing against the value.
Property type: residential, commercial, semi-commercial, land and properties needing heavy work are treated differently.
Exit plan: a credible sale or refinance plan supports the case; a vague one may reduce the offer.
Condition: unmortgageable properties may still be lent on, but often at lower limits.
Additional security: some lenders consider a charge over a second property to increase what can be borrowed, which also puts that property at risk.

Checklist before you rely on an LTV figure

Ask whether the LTV limit applies to the gross or the net loan.
Request the net cash figure in writing.
Find out who instructs the valuation, what it costs and whether it is refundable.
Plan for a down-valuation: know where extra funds would come from.
Check the combined LTV if there is an existing mortgage.
Confirm how the exit lender or buyer will view the same property.
Check the status of the lender and any broker on the FCA Register.

Does a lower LTV make the loan cheaper or safer?

Lenders often price lower-LTV loans more favourably, because there is more equity protecting their position. For a borrower, a lower LTV also leaves more room if values fall or the exit takes longer. That does not mean you should borrow less than your project needs, but it is worth modelling what happens if the property is worth less at the end of the term than at the start. If the property is sold for less than the debt plus interest and fees, you may still owe the shortfall, and personal guarantees may apply.

Regulation is a separate question. Bridging loans to individuals secured on a home they or close family live in are usually regulated by the Financial Conduct Authority, while most loans to companies and investment or commercial bridging are not. Unregulated borrowing does not offer the same protections, so independent legal advice matters.

A local example

To show how lenders typically set this out, Elara Advisory, a private credit firm registered in the United Arab Emirates, describes its bridging facilities on its website as ranging from £75k to £5M over terms of 1 to 24 months, with LTV of up to 75% considered and first and second charges considered. It also states it does not lend to consumers. Any figure like this is a maximum subject to the lender's own assessment, so compare written terms and check the status of every firm you deal with.

FAQ

Is LTV based on the purchase price or the valuation?

Lenders generally use their own valuation. Some use the lower of the price and the valuation on a purchase, so ask which applies.

What is the difference between gross and net LTV?

Gross LTV uses the full debt including fees and retained or rolled-up interest; net LTV uses the cash you actually receive.

What happens if the valuation comes in low?

The lender usually reduces the loan to keep within its limit, so you would need to find the difference, renegotiate the price or walk away.

Can I borrow more using a second property?

Some lenders consider additional security, but that property is then at risk if the loan is not repaid.

Sources

General information only, not financial or legal advice. Bridging finance is credit secured on property, which may be at risk if the loan is not repaid. Check terms carefully before you borrow.

The SME Ledger editorial team

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