Property finance glossary.
The bridging, development and commercial finance terms lenders use, in plain English. Twenty-two of them, grouped by what they tell you, and each with its own link so a page can point straight at one definition.
Bridging loan · Development finance · Auction finance · Mezzanine finance · Second charge · First charge · Arrangement fee · Exit fee · Rolled-up interest · Retained interest · Serviced interest · LTV · LTC · LTGDV · GDV · ICR · Gross loan · Net loan · Drawdown · Monitoring surveyor · Exit · SPV
What the loan is.
Bridging loan
A short-term loan secured on property, usually 3 to 24 months, repaid by a sale or a refinance.
Development finance
A loan to buy land or a building and fund construction, released in stages as the build progresses.
Auction finance
Bridging finance used to complete an auction purchase, typically within 28 days of the hammer falling.
Mezzanine finance
Extra funding that sits behind the main lender, used to reduce the cash the developer puts in.
Second charge
A loan secured behind an existing first charge on the same property.
First charge
The main legal charge over a property; the first charge holder is repaid first if the property is sold.
What it costs.
Arrangement fee
The lender's fee for setting up the loan, usually a percentage of the gross loan and usually added to the loan.
Exit fee
A fee some lenders charge when the loan is repaid, usually a percentage of the loan.
Rolled-up interest
Interest added to the loan each month and repaid in full at the end.
Retained interest
Interest calculated up front and held back from the loan, so no monthly payments are made.
Serviced interest
Interest paid monthly, like a normal mortgage.
How big it can be.
LTV (loan to value)
The loan as a percentage of the property's current value.
LTC (loan to cost)
The loan as a percentage of the total cost of a project, including purchase and build.
LTGDV (loan to gross development value)
The loan as a percentage of the finished value of the development.
GDV (gross development value)
The expected value of a development once complete.
ICR (interest cover ratio)
How far the rent covers the mortgage interest, used by buy-to-let lenders to set the maximum loan.
What you actually receive.
Gross loan
The whole facility, including fees and any rolled-up or retained interest.
Net loan
The money that actually reaches the borrower after fees and interest are taken from the gross loan.
How it is paid out and repaid.
Drawdown
A release of money from a development facility, usually after a monitoring surveyor confirms the work is done.
Monitoring surveyor
An independent surveyor who checks progress on site before each drawdown.
Exit
How the loan will be repaid at the end of the term, for example by selling the units or refinancing onto a mortgage.
Who borrows.
SPV (special purpose vehicle)
A limited company set up only to hold property, often used by landlords and developers.
Not sure which applies to your deal?
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