If you are seeking development finance or bridging finance in the UK, you will frequently encounter three key metrics:

1) Loan to GDV (LTGDV)
2) Loan to Cost (LTC)
3) Loan to Value (LTV)

Understanding how these ratios work is essential for structuring a potential property project correctly, assessing leverage, and maximising return on equity.

This guide breaks down each metric clearly and explains how lenders apply them in practice.

What Is Loan to Value (LTV)?

LTV is the simplest metric. It measures the loan amount against the current value of the property.

Formula:

Loan Amount ÷ Current Property Value = LTV

Example:

If a property is worth £1,000,000 and the loan is £700,000:

LTV = 70%

LTV is used throughout property lending, and reflects the lender’s risk position against the existing value of the asset.

A lower LTV typically means greater security coverage for the lender and therefore lower risk.

What Is Loan to Cost (LTC)?

LTC measures the loan against the total cost of the project. Total costs often include:

1) Acquisition costs
2) Stamp Duty
3) Professional fees
4) Build costs
5) Contingency

Formula:

Loan Amount ÷ Total Project Cost = LTC

Example:

If total project cost is £2,000,000 and the loan is £1,500,000:

LTC = 75%

LTC displays how much of the anticipated project cost is being funded by the lender.

Some lenders cap LTC to ensure the project retains meaningful equity throughout the agreed term of the loan.

What Is Loan to Gross Development Value (LTGDV)?

LTGDV is commonly used in development finance. It measures the value of the loan against the projected value of the completed scheme.

Formula:

Loan Amount ÷ Gross Development Value = LTGDV

Example:

If GDV is £4,000,000 and the total facility is £2,800,000:

LTGDV = 70%

This metric allows lenders to assess risk based on the projected end value rather than just total anticipated cost. Specialist development lenders may offer higher LTC percentages provided LTGDV remains within acceptable limits.

How These Ratios Work Together

In practice, lenders often assess all three metrics. For example:

1) Day 1 LTV assesses acquisition risk
2) LTC measures capital exposure
3) LTGDV evaluates overall project leverage

A loan may potentially look like this:

70% LTGDV
85% LTC
65% Day 1 LTV

Each ratio provides a different perspective on risk.

Understanding how they interact enables property developers and landlords to structure projects more effectively and anticipate lender appetite, whilst ensuring there is a profit margin to be achieved at the projects conclusion.

Why These Ratios Matter for Developers

Leverage directly impacts:

1) Return on cash invested into the project
2) Cash flow requirements during the build
3) Risk exposure throughout the agreed term of the loan

4) Exit options and flexibility

Higher leverage (whether LTV, LTC or LTGDV) generally increases the associated risk of the project. Conservative leverage may limit scale but improve stability.

Professional developers consider:

Market conditions
Sales speed
Construction complexity
Exit route

How Specialist Lenders Approach Leverage

Rather than applying rigid criteria, specialist lenders will typically assess:

Track record
Build experience
Location
Market demand
Exit strategy
Security package
‍ ‍
A strong project with credible management may have access to a higher leverage from a lender.