LTV vs LTC Explained
When applying for property finance in the UK, two ratios come up in almost every conversation: LTV (Loan to Value) and LTC (Loan to Cost). Understanding the difference is essential — it directly affects how much you can borrow and which lenders will consider your deal.
What is LTV (Loan to Value)?
LTV measures the loan amount as a percentage of the property's current market value.
Formula: LTV = (Loan Amount ÷ Property Value) × 100
Example: You want to buy a commercial property valued at £500,000 and need a £350,000 loan. Your LTV is 70%.
LTV is the standard metric for most property lending — commercial mortgages, bridging loans, and buy-to-let finance all use it. Most lenders cap LTV at 65%–80% depending on the product and risk profile.
What is LTC (Loan to Cost)?
LTC measures the loan amount as a percentage of the total project cost — including purchase price, build costs, professional fees, and contingencies.
Formula: LTC = (Loan Amount ÷ Total Project Cost) × 100
Example: You're developing a site with a total cost of £1,200,000 (land: £400,000, build: £700,000, fees: £100,000). If the lender offers £900,000, your LTC is 75%.
LTC is primarily used in development finance where the end value (GDV) is significantly higher than the current value.
When Each Ratio Matters
| Scenario | Primary Ratio | Why |
|---|---|---|
| Buying an existing property | LTV | Value is known, no works planned |
| Light refurbishment | LTV | Minor works, value uplift is modest |
| Ground-up development | LTC + LTGDV | Costs are the key input; GDV is the exit |
| Heavy refurbishment | LTC | Significant works change the value equation |
| Refinancing | LTV | Based on current or new valuation |
How Lenders Use These Ratios
Lenders use LTV and LTC to assess risk. The lower the ratio, the more equity you have in the deal — and the less the lender stands to lose if things go wrong.
Typical lending limits:
- Commercial mortgages: 60%–75% LTV
- Bridging loans: 65%–80% LTV
- Development finance: 65%–75% LTC, up to 65% LTGDV
- Buy-to-let: 65%–80% LTV
Some lenders will stretch these limits with additional security (e.g., a charge over another property) or for experienced borrowers with a strong track record.
LTGDV: The Third Ratio
In development finance, there's a third ratio: LTGDV (Loan to Gross Development Value). This measures the loan as a percentage of the completed project's value.
Formula: LTGDV = (Loan Amount ÷ Gross Development Value) × 100
Lenders typically cap LTGDV at 60%–65%. This protects them in case the finished development doesn't achieve the projected sale prices.
Practical Tips
- Know your numbers before approaching a lender. Calculate all three ratios so you can speak their language.
- Lower ratios get better rates. If you can put more equity in, you'll access cheaper finance.
- Different lenders weight ratios differently. A broker can match your deal to the lender whose criteria best fit your profile.
- Contingencies matter. Lenders want to see a 5%–10% contingency built into your cost projections.
Frequently Asked Questions
Which ratio is more important — LTV or LTC?
It depends on the deal. For straightforward purchases, LTV is what matters. For developments or heavy refurbishments, LTC is the primary metric lenders assess, alongside LTGDV for the exit.
Can I borrow 100% of a property's value?
Not typically on a single property. However, some lenders offer 100% of the purchase price if you can provide additional security — for example, equity in another property. This effectively gives you 100% funding while keeping the lender's overall LTV within their limits.
How do I improve my LTV or LTC position?
Three ways: increase your cash deposit, use equity in other properties as additional security, or find a deal where you're buying below market value (which improves LTV from day one).
Need Help With Your Numbers?
We work with property developers and investors every day to structure deals that work. If you're unsure how your ratios stack up — or which lenders will work with your profile — speak to our team for a free consultation.