From your experience with mortgages (even if just on your own home), you’ll already know what loan-to-value is: the size of the loan divided by the price of the property. So a loan of £75,000 against a £100,000 property will have an LTV of 75%.

But what determines the “value” part in the case of bridging?

For mortgages, the “value” of a property will always be the lower of its current value or the purchase price. In other words, if a property would be worth £100,000 on the open market but you’ve snaffled it for £85,000, the lender will value it at £85,000. If they’re prepared to give you an LTV of 70%, that means you can borrow £59,500 (70% of £85,000) rather than the £70,000 (70% of £100,000) you might have wanted.

In the case of bridging, it’s often no different. But some bridging lenders will lend based on just the current market value – and ignore what you paid for it. So in our example above, you would be able to borrow based on the true £100,000 value – and therefore borrow more money, assuming the same LTV.

Some lenders will also offer loans based on the Gross Development Value (GDV) – which means what the property will be worth once you’ve completed your planned works on it.

Continuing the same example, say that once you’ve given the property a comprehensive refurb it will be worth £120,000. A lender might then give you (say) 70% of this figure – which is £84,000. Initially they’ll only give you an amount based on its current value, but they’ll give you the extra at the end once you’ve done the work to increase the value – or give it to you in stages as work progresses.

If you can find a lender who’ll lend based on market value and also contribute to the cost of the works (by lending against GDV), you’ll be able to borrow more money than you otherwise would. This is obvious to see when you consider the exact same situation assessed by three lenders with different criteria:

If you’re trying to stretch your cash as far as possible so you can afford to do a project, that’s a big difference. But remember: borrowing more means higher interest charges, which you’ll need to factor into the cost of completing the project.

Just like with a mortgage, the bridging lender will instruct a RICS-qualified surveyor to inspect the property and determine its value. And just like with a mortgage valuation, you might be disappointed by the figure they decide on.

You’re almost guaranteed to disagree with their valuation, because you’ll be looking at the project optimistically and they’ll be playing it safe so they can’t get into trouble with the lender later. It’s just one of those things: to reduce the risk of a valuation scuppering your plans, try to work off conservative numbers so you’ll still be able to get the loan you want even if the valuer doesn’t share your optimism.

If you already have your own valuation, it will almost never be sufficient: the lender will want to instruct their own valuation, which you’ll need to pay for. In some circumstances, if you have a recent valuation a lender might agree to that valuation being updated so it’s addressed to them: this means that the lender can take legal action against the valuer if they later lose money as the result of an inaccurate valuation. The valuer will sometimes charge to re-address a valuation (which you’ll have to pay for), but it’ll be much cheaper than getting a whole new one.