What Is Rolled-Up Interest On A Bridging Loan?
Rolled-up interest is interest that is added to the loan balance each month rather than being paid as it falls due. The whole amount — capital plus accrued interest — is settled when the loan is repaid.
It is standard on bridging finance and development funding, where the borrower usually has little or no income from the property during the term.
The Three Ways Bridging Interest Is Handled
- Serviced — you pay the interest monthly from your own funds, and the balance stays flat
- Rolled up — interest accrues onto the balance and is paid on redemption
- Retained — the lender holds back enough interest from the advance at the outset to cover the term, so you receive less on day one but nothing to pay monthly
Retained interest is often confused with rolled-up interest. The difference is when it is charged: retained comes out of your advance upfront, rolled up accumulates as you go.
Rolled-Up Interest Example
- Loan: £400,000 over 12 months
- Nothing paid monthly
- On redemption you repay the £400,000 plus all interest accrued over the twelve months, plus any exit fee
Note that interest normally compounds — each month’s interest is charged on a balance that already includes previous months’ interest. Over a longer term that compounding is worth understanding rather than assuming a simple multiple.
Why It Affects How Much You Can Borrow
Because the balance grows during the term, the lender is underwriting the final figure, not the opening one. The loan to value is assessed against where the debt will be at redemption, so rolling up interest reduces the net amount you can draw at the start.
The other point worth being blunt about: rolled-up interest keeps cash free during a project, which is genuinely useful, but it also means the debt is quietly increasing every month. If the exit slips — a sale falls through, a refinance takes longer than planned — the balance keeps climbing. A realistic exit plan matters more on a rolled-up facility than on a serviced one.
Read more about bridging loans and property development finance, or speak to us about a project.
We arrange unregulated bridging finance only.
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