Loan to GDV and LTV explained: the ratios that size your exit loan

The four ratios that size a development loan, side by side

Every leverage ratio in development finance is a fraction with the loan on top and a different number underneath. Loan to GDV divides the loan by gross development value, the figure a scheme is expected to sell for once finished. Loan to value divides it by the asset's current open market value as things stand today. Loan to cost divides it by the total money spent to build, meaning land, construction, professional fees and contingency. Day-one loan to value divides the cash actually released on day one by that same current value. Same numerator idea, four denominators, four answers.

Because the denominators measure different things, the ratios are not interchangeable, and a lender will often name the one it is quoting without saying so plainly. The table below sets out each formula, what it measures and the indicative band a developer tends to see. Read it as a map rather than a rate card, because the bands move with the asset, the funder and the stage, and none is an offer of finance.

One point trips people up more than any other. On a scheme at or near practical completion the current value and the gross development value converge, so loan to value and loan to GDV can look almost identical at exit, yet stay firmly apart during the build, when what has been spent, what the site is worth today and what it will fetch when sold are three very different numbers.

Why the same loan shows four different percentages

The clearest way to see the difference is to take one facility and express it four ways. The scheme below is a small block valued at 5 million pounds once finished and sold, built for a total cost of 4.375 million pounds, and worth 4.75 million pounds in its present near-complete state. Against it sits a single gross facility of 3.5 million pounds, of which about 3.15 million pounds reaches the developer on day one after interest and fees are retained. Every number in this example is illustrative rather than an offer of finance.

The same 3.5 million pound loan is a 70 percent facility, an 80 percent facility, a 73.7 percent facility and a 66.3 percent facility all at once, and every one is true. A developer who hears 80 percent from one source and 70 percent from another is not being told contradictory things: one is quoting loan to cost from the build side, the other loan to GDV from the value side. The gap between the two is largely the developer's profit margin sitting inside the appraisal, which is why the ratios diverge on a scheme expected to make money.

Which ratio binds at each stage of a scheme

A development passes through three moments where a different ratio holds the pen. Through acquisition and the build, loan to cost governs, because there is no finished value to lend against and the funder is releasing money against spend. The lender caps the facility as a percentage of total cost and advances it in tranches as the build hits agreed milestones, so loan to cost is the live constraint while the scheme is a building site.

At practical completion the picture inverts. A finished value now exists, verified by a valuer, so loan to GDV takes over and loan to cost falls into the background. This is the moment a development exit loan does its work, refinancing the construction facility sized on cost onto a value-based facility sized on GDV, and giving the developer a calmer window to sell. Day-one LTV then answers the cash question, measuring what the exit facility puts in the developer's hands after retention against the value of the completed asset.

• Acquisition and build: loan to cost binds, drawn in tranches against construction milestones
• Practical completion and exit: loan to GDV binds, sized on the finished, sold value
• The day the exit draws: day-one LTV shows the net cash released against current value
• Held as an investment afterwards: ordinary loan to value binds on the standing asset

Knowing which ratio is live at each stage stops a developer planning the exit against the wrong number. A scheme that ran to 85 percent loan to cost during the build will not carry 85 percent of GDV at exit, because the exit ratio is deliberately more conservative. The pillar picture across the whole journey sits on our page at /solutions/development-exit-loans/.

How an exit funder reads loan to GDV with net development value

Loan to GDV rarely travels alone at exit, because a funder wants comfort not just on the headline value but on the money the scheme actually banks. That is where net development value comes in. Net development value is the gross development value less the costs of sale, meaning agent fees, legal costs, marketing and any sales incentives that fall between the sale price and the cash received. A funder sizes the day-one advance on GDV, then checks that the loan, the retained interest and the developer's margin all still clear once the units sell at net development value.

The two figures play distinct roles. Gross development value is the denominator of the loan to GDV cap, because it is the number the RICS Red Book valuation reports. Net development value is the pot the loan is repaid from, so it governs whether the exit is realistic rather than how large the advance can be. A high loan to GDV supported by thin net development value, where the costs of sale or a soft market eat the margin, is a facility a careful funder will trim. Our companion guide to how a valuer fixes the finished value sits at /learn/gdv-explained-for-developers/.

It is also why two schemes at the same loan to GDV can be priced differently: the one with strong comparable evidence and a healthy gap between GDV and the debt reads as lower risk than one where the net proceeds barely cover the loan and the roll-up. We model the loan to GDV against the net development value before a case goes out, so the leverage we arrange rests on the money the scheme genuinely receives. Those numbers are indicative, not an offer of finance.

What interest retention does to the cash you receive

The gross loan and the net loan are two different numbers on the same facility, and confusing them is the fastest way to be surprised at completion. The gross loan is the full facility the lender commits, and it is the figure the loan to GDV cap is usually measured against, because the retained interest must still fit within the value cushion by the end of the term. The net loan is the cash that actually reaches the developer on day one, after the lender holds back the interest and fees.

On a development exit the interest is normally retained or rolled up rather than serviced monthly, because a scheme in its sales period may have little income to pay interest from. Retaining it protects both sides: the developer makes no monthly payment, and the lender knows the interest is provided for. The cost is a lower day-one advance, which is what pulls the day-one LTV below the headline loan to value. The table below carries the earlier example through the retention.

So a 70 percent loan to GDV facility releases roughly 3.15 million pounds on day one, not the full 3.5 million, and the difference is retained interest rather than a shortfall. We structure each facility so the gross loan, roll-up included, stays within the ceiling loan to GDV the funder will accept, and so the net advance clears whatever the exit loan is replacing. Every figure here is a modelling band, never an offer of finance.

Improving your ratio without adding equity

A developer pushing against a loan to GDV cap has more levers than simply writing a larger cheque. The first is evidence. A loan to GDV is only as firm as the gross development value underneath it, so strengthening the valuation with recent, close comparable sales can lift the value the ratio is measured against and, with it, the facility the cap allows. A valuer who can see the units are selling well is more comfortable signing off the top of the range.

The second lever is sales. Reserved units and exchanged pre-sales cut the debt against the remaining stock and shorten the risk the lender is pricing, which can move a funder toward the upper band or sharpen the pricing at the same leverage. Partial redemptions from early sales bring the loan to GDV down as the scheme sells through, so the ratio improves without a penny of new equity. Staged drawdowns work the same way on the cost side during a build, releasing money only as it is needed so interest accrues on a smaller balance for less time.

• Refresh the comparable evidence so the valuer can support a fuller gross development value
• Exchange pre-sales to reduce the debt carried against unsold units
• Let partial redemptions from early completions pull the running loan to GDV down
• Use staged drawdowns on a build so interest accrues on a smaller balance
• Sharpen the exit narrative, whether unit sales or a refinance, so the funder prices less risk

None of these routes needs fresh cash: each works by changing what the ratio is measured against or how much risk the funder carries. We place each case with the funder whose criteria fit the scheme, testing the leverage against the valuation and the net proceeds before it reaches a lender, so the number that lands already sits inside their appetite. Development Exit Property Finance acts as an arranger and introducer rather than a lender, and the lending it arranges is unregulated commercial debt.