Loan-to-Value

How loan-to-value works

The calculation is loan amount divided by the relevant valuation, multiplied by 100. Lenders may distinguish gross and net loans, include retained interest or fees, and use different valuation bases.

Practical UK business example

A £300,000 loan against a property valued at £500,000 has a simple LTV of 60%. If fees or retained interest increase the gross facility, the lender’s reported LTV may differ.

Illustrative example only; not a finance quotation or a client case study.

Why it matters

LTV helps explain leverage and the lender’s security cushion. A smaller percentage does not by itself establish affordability or eliminate market-value risk.

Limitations and common misconceptions

It is not the same as loan-to-cost. Always establish which loan amount and valuation are used; a purchase price, market value and completed development value are not interchangeable.

Explore property finance to discuss how the structure relates to your business.