In property finance, the terms LTV and LTC are thrown around all the time. But do you actually know what they mean—and more importantly, how they impact your borrowing?

Whether you're buying, refinancing, or funding a development, understanding these two risk metrics is crucial to:

• Choosing the right lender
• Structuring your deal efficiently
• Avoiding surprises during underwriting

Let’s break them down.

🔍 What is LTV (Loan-to-Value)?

Loan-to-Value (LTV) is the ratio of your loan amount to the current or projected value of the property.

Formula:

Loan Amount ÷ Property Value × 100 = LTV %

💡 Example:

• Loan = £750,000
• Property Value = £1,000,000
• LTV = 75%

It’s the most common ratio in residential and buy-to-let lending. A lower LTV usually means:

• Better interest rates
• Faster approval
• Less scrutiny from underwriters

🔧 What is LTC (Loan-to-Cost)?

Loan-to-Cost (LTC) looks at the loan amount compared to the total cost of the project or transaction—not the final value.

Formula:

Loan Amount ÷ Total Cost × 100 = LTC %

💡 Example:

• Loan = £750,000
• Land cost = £500,000
• Build cost = £400,000
• Total Cost = £900,000
• LTC = 83%

LTC is most relevant in:

• Bridging loans
• Development finance
• Heavy refurb or value-add projects

Lenders use it to measure how much skin you have in the game.

So, which one matters more?

In short:

• LTV is about security value
• LTC is about your contribution

Lenders will often look at both—and they may cap your loan based on whichever is more conservative.

🏗️ The role of LTGDV (Loan to Gross Development Value)

In development finance, you’ll often hear about LTGDV too.

LTGDV = Loan ÷ Projected Finished Value

💡 Example:

• Loan = £3.5M
• Projected GDV = £5M
• LTGDV = 70%

Lenders will typically lend:

• Up to 65–70% LTGDV
• And no more than 80–90% LTC

Knowing these limits is vital for structuring viable development deals.

Why LTV can be misleading on its own

Let’s say you’re buying a below-market-value property at £800k that’s worth £1M once refurbished.

A lender offering 75% LTV may seem generous—but they may:

• Only lend based on the purchase price
• Not recognise full value uplift until works are done
• Still want to test your cost input (LTC)

So, even if the LTV looks strong, the LTC might concern the lender.

That’s where a skilled broker comes in—to explain the story and negotiate terms.

How to improve both LTV and LTC positions

Here’s what you can do:

To improve LTV:

• Reduce the loan amount
• Contribute more equity
• Choose lower-risk properties with strong valuations
• Time your application with market conditions

To improve LTC:

• Keep build/refurb costs under control
• Invest your own capital early
• Consider phased drawdowns or joint ventures
• Explore mezzanine finance to fill equity gaps

Why this matters in 2025

In today’s market, lenders are:

• More cautious due to market volatility
• Risk-averse with new builds and planning-led deals
• Keen to see sponsor commitment (i.e. how much you’re putting in)

Getting the LTV and LTC aligned to a lender’s risk appetite can mean the difference between:

✅ Getting funded quickly
❌ Or spending weeks reworking your case

How Willow helps you get both right

At Willow, we help clients:

• Present deals with the right risk metrics
• Position their contribution clearly (especially on LTC)
• Select the right lender based on risk appetite
• Avoid common mistakes that delay underwriting

We also structure deals that combine senior, mezzanine, and equity to maximise returns while staying within acceptable LTV/LTC bands.

Whether you're buying, refinancing, or building, we’ll model the options and handle the negotiation.

📞 Want Help Navigating Today’s Market?

Book a free strategy call with one of our mortgage specialists.

We’ll help you find the smartest way forward—whatever rates do next.