Rolled-Up vs Retained Interest
In UK bridging finance, interest is not usually paid monthly. Instead, lenders structure the interest in one of two ways: rolled up or retained. Understanding the difference is essential before you sign a facility letter.
Rolled-Up Interest
With rolled-up interest, the monthly interest charge is added to your outstanding loan balance each month. You make no payments during the term. At redemption (when you repay the loan), you repay the original principal plus all the accumulated interest.
Key characteristics:
- No monthly payments required
- You receive the full gross loan amount upfront (less fees)
- Interest compounds — you pay interest on interest each month
- Redemption amount is higher than the original loan
Example: £300,000 loan at 0.85%/month over 6 months.
Month-by-month the balance grows: £300,000 → £302,550 → £305,122 → £307,716 → £310,332 → £312,970 → £315,630
Total interest: £15,630. Redemption: £315,630.
Retained Interest
With retained interest, the lender calculates the total interest for the full term and deducts it from the loan upfront. You receive reduced net funds, but repay only the original gross loan at the end.
Key characteristics:
- No monthly payments required
- Net funds received are reduced by the interest amount upfront
- Calculated as simple interest (non-compounding) on the gross loan
- If you repay early, the unused interest is returned to you
Same example: £300,000 loan at 0.85%/month over 6 months.
Retained interest = £300,000 × 0.85% × 6 = £15,300
Net funds received = £300,000 − £15,300 = £284,700
Redemption = £300,000 (the gross loan only).
Which Is Cheaper?
Retained interest is marginally cheaper because it uses simple (non-compounding) interest, while rolled-up compounds monthly. In the examples above: £15,300 (retained) vs £15,630 (rolled-up) on a 6-month term.
However, retained reduces the cash you receive on day one — which matters if you need the full loan amount for your project.
For a detailed comparison with full worked examples across different loan sizes and terms, see the Bridging Interest Calculator guide.
Early Repayment
Retained interest has an advantage if you repay before the full term: the lender returns the unused interest. With rolled-up interest, the outstanding balance simply reflects actual interest accrued to the repayment date.
Which Do Lenders Offer?
Most UK bridging lenders offer both structures. The right choice depends on:
- Whether you need maximum funds upfront (rolled-up)
- Whether you're likely to repay early and want to recover unused interest (retained)
- The specific lender's pricing — sometimes one method is priced better than the other
A broker can run both scenarios and show you the full cost comparison. Get in touch to compare options across the market.