Glossary
Retained interest
Bridging interest deducted from the loan upfront instead of paid monthly.
What it means
With retained interest, the lender works out the interest for the whole term and holds it back from the loan when it is paid out, so you make no monthly payments. That helps cash flow during a refurbishment, but it means the money you actually receive is less than the headline loan, and you need more cash at completion.
Worked example
ExampleA £90,000 bridge for six months at 0.85% a month, with a £1,800 fee also deducted.
- Retained interest
- £90,000 × 0.85% × 6 = £4,590
- Net advance
- £90,000 − £4,590 − £1,800 = £83,610
On a £120,000 purchase, you need £36,390 at completion, not £30,000.
Information, not advice. Example figures are fictional and for illustration only.