Open Market Value Bridging
BTL and residential mortgages lenders work the LTV (loan to value) off the purchase price. 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%.
If the purchase price was £85,000 but the open market value was £100,000, the majority of lenders would work off 75% against £85,000, meaning a loan of £63,750. In the case of bridging, it’s often no different. But some bridging lenders will lend based on the open 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.
These bridging lenders usually work off 75% against the open market value or 90% against the purchase price, and offer against the lower amount.
85k purchase price
75% against OMV = £75,000
90% against pp = £76,500
Loan offered at £75,000. This means you put less money into the deal if you were buying at 85k and using a lender that only offers 75% against the purchase price.