How the Loan to Value (LTV) can differ
If we take a typically case of a customer who applies directly to a Bridging Finance lender but doesn't know they lending criteria.
The property in question has a valuation of £250,000 and the customer needs £200,000 from a Bridging loan to make the deal work.
The customer has seen an advert that a lender can advance up to 80% LTV and the customer has a 20% cash deposit so the deal looks feasible.
The customer pays £500+VAT for a valuation and when it comes back, the surveyor has valued the property at £200,000 and not the £250,000
The Bridging Finance lender will only advance 80% of the £200,000 which is £160,000 leaving the customer £40,000 short
Why is there a £50,000 valuation difference
There are 3 main valuation definitions that Bridging Finance lenders use and these are:
1) OMV - Open market valuation and in our example this would be the £250,000
2) OMV 180 day - This requires to valuation the property if it needed to sold within a 180 days
3) OMV 90 days - This is referred to as the forced sale valuation and asks the surveyor to valuation the property in a distress sale. Valuations are in the region of 20% to 40% below the standard OMV.