80% LTV Bridging: what you actually put in

The question I get every week

Fair enough. Everybody would like that. So let’s take it seriously and answer it properly.

Are there lenders who will go to 80% loan to value on a bridge? Yes. There genuinely are. But there’s a catch that costs people tens of thousands, and it isn’t the rate and it isn’t the fees.

First, two things this article isn’t about.

It isn’t about below market value deals, where you’re buying at, say, 75% of what the place is really worth and the numbers behave differently. And it isn’t about the 100% headline that quietly needs two or three of your other properties cross-charged in the background. We’re talking about one property, bought at what it’s worth, with as little of your own money in it as possible.

The 80% isn’t the number you get

Before the numbers make any sense, one thing has to be said plainly.

The 80% almost always describes the gross loan, not the money you receive. The gross loan is the headline figure the lender approves. Retained interest and the arrangement fee come off it before anything reaches your solicitor. What actually turns up is the net advance, and it’s a meaningfully smaller number.

That distinction deserves its own article and it’s getting one. For now, just hold on to it, because it’s what the next section turns on.

What that looks like with real numbers

Here’s a real example, and the numbers are the point rather than the story.

A client came to me with terms he had been offered: 80% on his purchase. That’s unusual, so we looked at them properly.

• Purchase price: £500,000
• Cash he had available: about £120,000
• 80% gross: £400,000
• What he assumed he needed to put in: £100,000
• What actually landed once we netted it out: around £340,000

So the deposit was never £100,000. It was closer to £160,000, against the £120,000 he had set aside.

Nobody had lied to him. The lender said 80% and meant 80% gross. It’s just that nobody had sat down and netted it out with him, so he had built his plan around a number that was never going to arrive.

The gap isn’t a mystery either. Most of it’s retained interest: the lender takes the full term’s interest out of the facility on day one so the loan services itself. Convenient, and completely standard. But it’s your money, funded up front, out of the same pot you were going to refurbish with.

That’s the thing to check before you commit to anything. Not the headline percentage. The net advance, in pounds, on the day it lands.

A note on figures: the deals I talk about are long gone. I don’t discuss current deals, live rates or arrangement fees. The criteria and the principle are what carry over, and those haven’t changed.

What most lenders actually lend

At the time of writing there’s a lender who would consider 80% on a net basis. But understand what the rest of the market does.

Most lenders lend 75% gross. Some sit at 70%.

So if you’re asking for 80%, you’re asking the sharpest end of the market for its best terms, and you need a proposition worth saying yes to.

People come to me wanting to put in as little as possible, borrow as much as possible, on the best rate, with the lowest arrangement fee, completing in a couple of days. I like my cake and I like to eat it as well. It doesn’t usually work like that.

What a lender at that level needs to see

• A clear exit strategy, in detail, not in principle
• A minimum loan size met
• A maximum loan to value against the GDV, the gross development value, not just against what you’re paying today
• What you’re buying it for, what you’re doing to it, and what that costs

Lenders aren’t in the business of putting you on a bridge you can’t get off. That’s exactly why so few of them go to 80%, and why the ones that do ask harder questions.

The way these deals actually go wrong

I see it from the other side too, when someone comes to me for the refinance.

It goes like this. They bought with an 80% bridge, put very little in, and planned to do the place up and sell it. Then the works cost more than expected. Then material prices went up, so the same work cost more again. Then the builders were delayed, so it hit the market later than planned. And then it didn’t sell for what they thought it would.

Now they need to remortgage out of it. And here’s the wall: on a refinance you’re generally looking at up to 75% of the value. They’ve put very little in and spent a lot, so there’s no room left. There’s nothing to refinance into.

Every one of those problems is survivable on its own. Stacked together, on maximum leverage, with no cushion, they aren’t.

How to check your GDV without guessing

People ask me the best way to work out what a place will actually be worth finished. It isn’t rocket science, and you can do it this afternoon.

• Go on Rightmove and put in the postcode of the property you’re buying.
• Set a radius: a quarter of a mile, half a mile, a mile, depending on how built up the area is.
• Look at what comparable properties are actually listed at.
• Read the wording. Is the agent saying “guide price”? “Offers over”? That tells you which way the agent expects it to move.
• Look at how long they’ve been sitting there. This is the one everyone skips. If two similar properties have been on the market six months with no movement, and you can see the price has been dropped along the way, that’s your answer. Demand is thin, and your finished house isn’t selling in eight weeks at your number.

Do that before you offer, not after you complete.

So, can you get 80%?

Yes. In the right circumstances, and with the right proposition.

But the honest answer is that the conversation never stays on the LTV. It ends up on the exit, every single time. You can put in as little as possible, but you still have to get out: sell it, or refinance it, and get your money back at the other end.

If the deal stacks up, it stacks up. Take it to a broker and let someone run it through experienced eyes before you commit, because the lenders who play at this level don’t do ifs, buts and maybes without a good reason.

Run your own numbers first. Our bridging calculator shows the gross loan, the deductions and the net advance side by side, so you can see the gap before anyone is committed to anything.

Or ring me on 0330 133 4442 and we’ll net it out together in ten minutes.

Figures relate to the circumstances and the lending terms available at the time of that transaction, and the terms available to somebody else may be different. Bridging finance is short-term secured borrowing and it can be expensive. If a secured loan is not repaid in line with its terms, the lender may take enforcement action against the property or any other security provided. This is general information, not personalised advice.