Lenders assess True LTV on bridging and development loans accounting for rolled
Lenders assess True LTV on bridging and development loans accounting for rolled-up interest and fees, meaning the actual loan balance at redemption can be 8–12% higher than the initial advance.
Lenders assess True LTV on bridging and development loans accounting for rolled-up interest and fees, meaning the actual loan balance at redemption can be 8–12% higher than the initial advance.
A critical nuance in bridging and development finance is the difference between 'Net Loan' and 'Gross Loan'. When a lender advertises a 75% Loan-to-Value (LTV) bridging product, they are referring to the Gross LTV. The Gross Loan includes the initial capital advanced to the borrower (the Net Loan), plus the lender's arrangement fee (typically 2%), plus the total retained interest for the term (e.g., 12 months at 1% = 12%).
If an investor buys a £100,000 property, a 75% Gross LTV limit means the maximum total debt cannot exceed £75,000. If the arrangement fee is £1,500 and the 12-month retained interest is £9,000, these are deducted from the £75,000. The borrower only receives a Net Advance of £64,500 on day one (a 64.5% Net LTV). Developers must rigorously model Gross LTV to accurately calculate their required day-one cash contribution.