If you’re new to property refurbishment finance, chances are you’ve come across terms like LTV, LTGDV, rolled-up interest, or even exit strategy—and felt completely lost.
You’re not alone.
At Sunrise Commercial Finance, we speak to new property investors every day who are eager to fund their refurbishment projects but get overwhelmed by the complex bridging loan terminology thrown at them.
In this guide, we’ll decode the most essential property finance terms, helping you move forward with confidence.
Whether you’re flipping your first property or undertaking a light refurbishment project, this is your go-to glossary—explained simply, with examples you can relate to.
What Is a Bridging Loan, and Why Use One?
Before we dive into the terminology, let’s set the stage.
A bridging loan is a short-term, interest-only loan designed to “bridge” the gap between purchasing a property and securing longer-term finance or selling the property.
They’re especially useful for:
- Buying auction properties quickly
- Funding refurbishment or development projects
- Resolving cash flow issues between buying and selling
- Financing uninhabitable or unmortgageable properties
Bridging finance is fast, flexible, and tailored—but also layered with jargon. Let’s decode it.
1. Loan-to-Value (LTV) – What It Really Means
Loan-to-Value (LTV) measures how much you’re borrowing compared to the current value of the property.
Example:
If you’re purchasing a property worth £250,000 and a lender is offering 70% LTV, you can borrow £175,000. The remaining £75,000 would need to come from your own funds or other financing.
Why It Matters:
- A higher LTV means you borrow more but may face higher interest rates.
- A lower LTV often unlocks better terms and shows lenders you’re lower risk.
2. Loan-to-Gross-Development-Value (LTGDV)
Loan-to-Gross-Development-Value (LTGDV) measures your loan amount against the expected end value of your property after development or refurbishment.
Example:
You’re borrowing £300,000 to refurbish a property that’s expected to be worth £500,000 once completed. Your LTGDV is 60%.
Why It Matters:
- LTGDV is crucial when applying for refurbishment or development finance.
- It reflects how profitable the project will be post-completion.
- Most lenders cap LTGDV between 60–70% for heavy refurb or ground-up builds.
3. Rolled-Up Interest – No Monthly Payments
With rolled-up interest, you don’t pay monthly instalments. Instead, the interest is added to the loan balance and repaid in full at the end of the loan term.
Example:
You borrow £100,000 at 1% per month for 10 months = £10,000 in interest.
At the end of the loan, you repay £110,000.
Why It Matters:
- Ideal for cash-strapped developers focusing on the build or refurb.
- Keeps monthly outgoings low while work is underway.
- But beware: the loan balance grows over time.
4. Arrangement Fees – The Cost of Setting Up the Loan
This is the lender’s setup fee, typically 1% to 2% of the total loan amount.
Example:
Borrowing £200,000 with a 2% arrangement fee = £4,000, which is often added to the loan balance.
Why It Matters:
- It’s a cost you’ll pay upfront or on drawdown.
- It affects your total borrowing needs and profit margins.
5. Exit Fees – Do All Lenders Charge This?
Some bridging lenders charge a fee when you repay the loan, usually 1% of the loan amount. Not all do.
Example:
If you repay a £150,000 loan with a 1% exit fee, you’ll owe an extra £1,500.
Why It Matters:
- Often overlooked in cost comparisons.
- Choose lenders carefully—some offer no exit fees as a USP.
6. Open vs. Closed Bridging Loans
Closed Bridging Loan
- You have a clear repayment plan and a known exit date (e.g. you’re completing a property sale within 3 months).
- Less risk for lenders = lower rates.
Open Bridging Loan
- No fixed repayment date yet (e.g. waiting for planning approval or refinancing).
- More flexibility, but usually higher rates due to the added risk.
Why It Matters:
Understanding the difference helps you choose the right product and manage lender expectations.
7. Security – What You Put on the Line
Every bridging loan is secured against property. That means the lender can repossess it if you default.
You can offer:
- The property being purchased
- Additional property (cross-collateral security)
- Land or commercial property
Why It Matters:
The type and value of your security will affect how much you can borrow and at what interest rate.
8. Exit Strategy – Your Repayment Plan
An exit strategy is how you plan to repay the loan at the end of the term.
Typical exit strategies include:
- Selling the property after refurbishment
- Refinancing onto a buy-to-let or term mortgage
- Using proceeds from another sale or investment
Why It Matters:
- A solid exit plan improves your approval chances.
- Lenders won’t approve your loan without a clear and viable exit.
Bonus Tip: Don’t Ignore Legal & Valuation Fees
Besides the main terms, also budget for:
- Legal fees (yours and often the lender’s)
- Valuation fees (a professional property valuation is required)
- Broker fees (if you use a commercial finance broker like Sunrise Commercial)
Understanding all costs upfront gives you a clearer picture of your true return on investment (ROI).
How Sunrise Commercial Finance Can Help
We specialise in helping new and experienced property investors secure fast, flexible, and cost-effective bridging loans—tailored to your project.
- Transparent advice
- Access to specialist lenders
- Help with paperwork and strategy
- Support through to completion
📞 Ready to Talk? Let’s Make Your Project Happen
📞 Call us at: 07939 091418
📧 Email: john@sunrisecommercial.co.uk
🌐 Visit: www.sunrisecommercial.co.uk
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