Valuation drives the loan
Loan-to-value uses the lender's valuation, which can be lower than the agreed price. If it is, the loan available may shrink and your required contribution may grow. Some lenders also base the calculation on the lower of price or value.
What affects the lender's appetite
Lenders weigh several factors together.
- Property type and how flexible the space is
- Tenancy strength or trading performance
- Location and local demand
- Condition and any works needed
- Borrower experience, credit and resources
Deposit versus total cash
Beyond the deposit, you may need funds for fees, legal costs, land tax and VAT, plus reserves. A plan that relies on every penny being available can fail with a modest down-valuation.
Hypothetical example, not a real client: a buyer saves exactly the deposit for a workshop. The valuation comes in below price, the loan reduces and fees are due, leaving a shortfall that must be filled or the purchase renegotiated.
Sources of deposit
Lenders want to know where the deposit comes from. Business funds, savings, gifts or additional security against other property are treated differently, and borrowed deposits may be restricted. Be clear and evidenced.
Loan-to-cost on works projects
Where a project includes works, some lenders look at loan-to-cost alongside loan-to-value, comparing the debt with the total of purchase price and works. A lender may be comfortable with the finished value but still expect you to have a meaningful stake in the project costs. Understanding both measures helps you plan the cash you need to commit at each stage.
Why limits differ between cases
Two buyers can see very different borrowing levels for similar prices. A modern, flexible warehouse let to an established tenant may attract more lender appetite than a specialist building with a short lease, even at the same value. Your experience, credit history, other assets and the strength of your business also move the result. That is why we do not publish universal limits; it is better to discuss your actual property and finances.
Hypothetical example, not a real client: two investors each consider a retail unit. One is let on a long lease with no breaks; the other has a tenant who can leave soon. Lenders may be willing to lend proportionally less on the second, because the income is less certain.
Building in a margin
Keeping funds in reserve after completion protects you against a down-valuation, an unexpected repair or a period without rent. Stretching every available pound into the deposit can leave no room for ordinary surprises, which lenders also notice when assessing resilience.
Explaining your contribution
Lenders want a clear audit trail for funds. Show where the money came from and that it is available when needed. Funds moving between accounts shortly before completion invite questions, so keep records.
If part of your contribution comes from selling another asset, lenders may want to see that sale complete, or close to completion, before releasing funds. Plan the timing so one transaction does not hold up the other, and tell your broker early if your deposit depends on someone else's process.
Your property may be repossessed if you do not keep up repayments on a loan secured on it. Sorbus Finance is a broker, not a lender. Finance is subject to lender criteria, status, valuation and affordability. We work with a panel of lenders, not the whole market, and do not promise a rate, fee level or outcome.