Loan to value (LTV)
Loan to value is the size of the senior construction loan divided by the project's gross realisation value. It's the second lever a lender uses to size debt.
Formula
GRV is sometimes used inclusive of GST; lenders usually quote LTV against ex-GST GRV.
Why it matters
LTV is the test that protects the lender against a price drop. If the project sells for 10% less than expected and LTV at completion is 70%, the lender is still covered. Most Australian construction lenders cap LTV at 60–65% on build-to-sell apartments.
Worked example
For the Waterloo scheme with GRV $28.59M and a $17M senior facility:
LTV = $17,000,000 / $28,590,000 = 59.5%.
This sits comfortably inside a typical lender LTV cap of 60–65%.
Questions
Frequently asked
Which is tighter — LTC or LTV?
It depends on the project. High-cost / low-revenue projects bind on LTV; low-cost / high-revenue projects bind on LTC. Lenders apply both tests and the loan is sized to the lower of the two.
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