Loan sizing calculator

How loan sizing works

The maximum loan is the lowest of three caps:

• LTV cap = current value × max LTV. The loan measured against what the property is worth today.
• LTC cap = total project cost × max LTC. The loan measured against the total cost to acquire and build or refurbish, which keeps the borrower’s equity in the project.
• LTGDV cap = completed value × max LTGDV. The loan measured against the value of the finished, trading asset, which protects against an optimistic completed valuation.

The maximum loan is the minimum of those three. The cap that produces the lowest figure is the binding constraint, the limit you would need to ease to borrow more. The implied loan to value is the maximum loan divided by the current value, which shows how the sized loan sits against current worth. The equity required is the total project cost less the maximum loan.

On a hospitality build or conversion the binding cap usually shifts through the project. During the works, loan to cost and loan to completed value tend to bind, and a development facility is drawn in stages against a monitoring surveyor rather than in a single drawdown. A short-term bridging loan may sit before or after that, sized the same way against value. Once the property completes and the trade settles, value rises toward the completed figure and loan to value relaxes, which is one reason a project refinances onto a cheaper commercial mortgage once it is trading. The figure here is the gross facility before costs, so remember an arrangement fee, typically around 1 to 2 percent, plus valuation and legal costs sit on top. See how we arrange development, refurbishment and commercial mortgage finance for hospitality property.