BMV Lender Underwriting – How Deals Are Assessed
BMV lender underwriting determines whether a discounted property purchase is viewed as a genuine opportunity or a higher-risk transaction. While below market value deals can look attractive on paper, lenders assess far more than the headline discount when deciding how much they are prepared to lend and on what terms.
Understanding how BMV lender underwriting works helps investors structure stronger applications, avoid failed valuations, and set realistic expectations around leverage, pricing, and exit viability.
Why BMV Deals Receive Extra Underwriting Scrutiny
Discounted acquisitions introduce additional risk considerations for lenders. Unlike standard purchases, BMV transactions raise questions around valuation accuracy, vendor motivation, and borrower intent.
From an underwriting perspective, lenders are asking:
• Is the discount genuine or artificial?
• Does the valuation reflect open-market reality?
• Is the borrower capable of executing the strategy?
• Is the exit realistic within acceptable timescales?
Because of this, BMV lender underwriting is typically more detailed than for open-market purchases — even when the borrower profile is strong.
1. Valuation Assessment – OMV Comes First
The cornerstone of BMV lender underwriting is the RICS valuation.
What lenders rely on
Underwriters lend against:
• Open Market Value (OMV) confirmed by a RICS surveyor
• Comparable evidence, not the agreed purchase price
• Market liquidity and condition at the valuation date
A discount only matters if the valuation independently supports it.
Why discounts don’t always translate into leverage
Even where a property is purchased well below asking price, the valuation may:
• Reflect condition issues
• Be constrained by local comparables
• Assume limited buyer demand
• Conclude the purchase price represents true market value
If the valuation comes in lower than expected, underwriting leverage adjusts immediately.
2. Purchase Price vs Valuation – How Lenders Reconcile the Two
One of the most misunderstood elements of BMV lender underwriting is how lenders treat purchase price relative to valuation.
Some lenders:
• Lend against OMV from day one
• Ignore purchase price if the discount is validated
Other Lenders:
• Blend purchase price and valuation
• Cap loan-to-cost regardless of OMV
• Apply reduced LTVs for discounted transactions
This is policy-driven, not negotiable, and varies significantly between lenders.
This is why investors often encounter conflicting advice — underwriting outcomes depend on which lender’s policy is applied, not simply the numbers in the deal.
👉 Understanding how lenders reconcile valuation and purchase price helps explain why leverage differs between BMV transactions. For investors looking beyond underwriting logic to see how funding is structured in practice, our guide to below market value bridging finance covers rates, leverage, terms, and eligibility in more detail.
3. Borrower Profile – Experience Still Matters
BMV lender underwriting places significant weight on borrower capability, particularly where leverage expectations are high.
Underwriters assess:
• Relevant project experience
• Track record with refurbishments or similar assets
• Financial conduct and credit profile
• Liquidity for works, interest, and contingencies
A strong discount does not compensate for:
• No refurbishment experience
• Weak liquidity
• Over-optimistic projections
Conversely, experienced borrowers often receive:
• More flexible leverage
• Greater confidence in exit assumptions
• Faster underwriting decisions
4. Exit Strategy – The Deciding Factor
No part of BMV lender underwriting is more important than the exit.
Lenders will review:
• Refinance vs sale
• Expected timelines
• Comparable evidence
• Exit lender appetite
• Seasoning requirements
Common exit issues underwriters flag
• Refinance assumed without confirming future lender criteria
• Over-reliance on short-term uplift
• Exit values unsupported by comparables
• Timescales that leave little margin for delay
Even strong valuations and borrower profiles can be overridden if the exit is considered fragile.
5. Works, Risk, and Downside Modelling
Where refurbishment is involved, underwriting extends beyond headline GDV.
Lenders assess:
• Scope of works realism
• Contractor experience
• Cost buffers and contingencies
• Impact of delays on exit and interest cover
Some lenders apply downside modelling, stress-testing:
• Lower resale values
• Longer exit periods
• Increased holding costs
This can reduce leverage even where the deal appears robust.
6. Why Similar Deals Receive Different Outcomes
A frequent frustration among investors is seeing two similar BMV deals produce very different lending outcomes.
This is usually due to:
• Different lender policies
• Different interpretations of valuation risk
• Different exit assumptions
• Different borrower profiles
BMV lender underwriting is not standardised across the market, even for similar transactions.
The same deal can be:
• Fully OMV-based with one lender
• Heavily blended with another
• Declined outright by a third
This is why broker-led lender selection is critical in discounted transactions.
How This Fits Within the Wider BMV Strategy
Many of the misconceptions investors hold around BMV funding stem from not understanding underwriting logic. As explored in our article on BMV Funding Myths, discounts alone do not dictate outcomes — underwriting does.
For a practical example of how valuation, exit planning, and lender policy interact, see our case study How OMV shaped a BMV Funding Structure.
Final Insight for Investors
BMV lender underwriting is not about chasing discounts — it is about risk alignment.
Successful BMV transactions are those where:
• Valuation evidence is defensible
• Borrower capability matches the strategy
• Exit routes are realistic and pre-assessed
• Lender policy genuinely supports discounted acquisitions
Understanding underwriting logic allows investors to structure deals that progress smoothly — rather than relying on assumptions that break down under scrutiny.
Speak to our BMV Finance Expert