What Does LTC Mean In Bridging Finance?

The abbreviation LTC stands for Loan To Cost and is a term used in the property finance industry. The most common use of this acronym is when calculating ratios in bridging loans and development finance. Loan To Cost means the amount a lender will provide as a loan against the total cost of a project. This could be as high as 100%.

For example

If you purchased a property for £500,000 and spent £200,000 then the total cost would be £700,000.

A bridging loan that offered a maximum facility of 90% LTC would lend up to £630,000.

Why lenders use LTC as well as LTV

Loan to value measures the loan against what the property is worth. Loan to cost measures it against what you are actually spending. On a refurbishment or development deal the two give very different answers, and a lender will normally cap against both, then lend whichever figure is lower.

That is the trap. A borrower who has been told 90% LTC often assumes that is the number that applies, when in practice the offer is capped at 70% of value or 65% of gross development value as well. The LTC figure only becomes the binding constraint when you are buying well, because it limits how much of your own money stays in the deal.

Typical positions across the market: 70% to 80% LTC on a straightforward bridge, up to 90% where the borrower is experienced and the numbers are strong, and 100% of build costs on development finance, provided the day one advance against the land keeps the overall exposure inside the lender’s gross development value cap.

Related terms

See also LTGDV, loan to gross development value, which is the cap that usually bites on a development scheme, and OMV, open market value.

For how these ratios work on a live case, see commercial bridging loans, which sets out lender types, loan to values and a worked example, or development finance for ground up schemes.

Bolton Business Finance is a whole of market commercial finance broker. Call 0161 546 9128.

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