What Does EUV Mean In Bridging & Development Finance?
The acronym EUV is an abbreviation of the phrase ‘Existing Use Value’. It is commonly used in the finance industry by property Bridging and Development loan providers.
The Existing Use Value (EUV) is simple the value of a piece of land or existing building, in its current form.
This may often be the same as the open market value (OMV). However sometimes the OMV may be higher than the EUV if there is an expectation that a change of use may increase its value.
For example if a piece of land is very likely to get planning permission, it could increase what somebody is willing to pay. This could be above and beyond its current Existing Use Value (EUV).
Likewise if a property could easily be converted into a different use, such as converting a commercial building into residential. This may also increase the value.
Why Existing Use Value Matters When You Are Borrowing
On a development deal the existing use value is the floor a lender starts from. Day one funding against a site is normally sized on the existing use value or the purchase price, whichever is lower, and not on what the land will be worth once planning is granted. That catches out buyers who have paid a premium for hope value and expected to borrow against it.
Once planning is in place the gross development value takes over as the reference point, and the facility is sized on loan to cost and loan to gross development value instead. Until then, the difference between what you paid and the existing use value is cash you have to find yourself.
Our development finance page explains how drawdowns and loan to cost actually work, and our bridging loan broker page covers funding a site before planning is secured.
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