Loan-to-Value or LTV is a term that frequently comes up when people talk about bridging finance. If you’re not sure what the term actually means, it refers to the percentage of the property value that you can borrow against. For instance, a 75% LTV ratio would mean borrowing three-quarters of the full value of the property.
Some people are tempted to take out higher LTV bridging loans. They can give you more borrowing power, but they can also mean taking on more risk. If you do take out one of these loans, you can expect to be charged more interest, be asked for more collateral or to create a more stronger exit strategy.
If you’re ready to find out more about this topic, read on. We’ll talk about the main options available to you from 75% all the way to 100% LTV bridging loans so you can understand which options might be best for your needs and what you need to look out for.
75% LTV Bridging Loans
75% LTV bridging loans are the best option for many people as they are high enough to ensure their needs are met but involve minimal risk. Regulated UK bridging loans don’t normally let you borrow more than 75% of the property value.
These loans tend to be most suitable for residential buyers with deposits, property investors who have existing equity and auction buyers who need cash quickly. They have lower interest rates as collateral covers most of the value and are easier to get approval for. They also give you greater flexibility when it comes to standard exit strategies like remortgaging and property sales.
However, they are still more expensive than mortgages so you can expect higher monthly or rolled-up interest. You’ll still need a reasonably strong exit strategy too.
See our 75% bridging loan options here.
80% LTV Bridging Loans
If you need more leverage, 80% LTV bridging loans can be a slightly riskier but still accessible option. These loans are popular with property developers who want to make their working capital go further, those who need to buy out of a chain break at short notice and people who want to secure quick purchases but don’t have a 25% deposit.
Interest rates tend to be higher with these loans due to the increased risk for the lender, and you will need a stronger exit strategy than you would with a 75% LTV loan. You may need an unregulated loan if you want to borrow 80% of the property value, which can mean less protection for you.
Take a look at our 80% bridging loan options.
90% LTV Bridging Loans
Loans at 90% LTV can be quite hard to come by as they are generally reserved for investors and special circumstances where the collateral or the deal structure means the greater risk is justified.
People who use 90% LTV loans tend to be experienced investors who have large and diverse property portfolios, developers in situations where time is of the essence who have high-value collateral and individuals with second exit strategies that are convincing enough to get the lender on board.
One of the advantages of these loans are that only a small amount of capital is needed up front and that they can enable deals when time and opportunity mean deposit limitations aren’t as important. On the downside, the interest rates and fees tend to be much higher, and fewer lenders tend to offer them. Approvals can involve lots of scrutiny. They tend to be good options when an opportunity is fleeting and there’s a lot of equity to back them up, or when a high-value asset is being sold at auction.
Explore our 90% bridging finance options here.
100% LTV Bridging Loans
With a 100% LTV bridging loan, you’re borrowing the whole value of the property and don’t have to pay any kind of deposit at all. These bridging loans are very rare and normally only available in very specific circumstances. You’re more likely to get one if you’re able to offer multiple properties or have non-standard collateral.
The interest on a 100% LTV bridging loan can be very high, as can the fees. They’re not available to most mainstream borrowers and need an extremely robust exit strategy if your application is to be accepted.
Read more about 100% bridging loans.
FAQs
What is the maximum LTV on bridging loans in the UK?
Most regulated bridging loans are capped at 75%, although some unregulated lenders can offer up to 100%.
Is 100% bridging finance really possible?
Yes, but you’ll need lots of high-value collateral and a very solid exit strategy. Almost all 100% LTV loans come from unregulated lenders.
Do high-LTV bridging loans cost more?
Yes. There’s much more risk for the lender when it comes to these loans, which means you can expect to face higher interest rates, larger fees and tougher eligibility rules.
Which LTV is best for property investors?
75% LTV is the most balanced. It’s a more accessible, lower cost and widely available option. 80% can be a good option when you need more funding quickly. You’re only advised to use 90% or 100% LTV option if you have substantial security and experience as well as a very tough exit strategy. Higher LTVs give you more leverage, but you need to manage the risk attached to them very carefully.
Final thoughts
75% is the best option for most borrowers and involves the lowest level of risk. 80% is a good option for many developers and in chain break situations. 90% is only suitable for very experienced investors and involves a large amount of risk, whilst 100% is reserved for very niche cases that involve extra collateral. 100% LTV comes with a very high risk level.
