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Retained vs Rolled Interest Calculator

Compare retained (deducted upfront) vs rolled (compounded) interest options for bridging loans

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About the Retained vs Rolled Interest Calculator

What it does and how it helps you

The Retained vs Rolled Interest Calculator helps UK property investors compare bridging loan interest options. See exactly how retained interest (deducted upfront) compares to rolled interest (compounded monthly) for your Day 1 cash and exit costs.

Side-by-side retained vs rolled comparison
Net Day 1 advance calculation for both options
Gross redemption cost comparison
Total cost of finance analysis
Clear recommendation based on your numbers

How It Works

Understanding the calculation method

When taking out a bridging loan, you have two main interest payment options:

Retained Interest: - Interest for the full term is calculated upfront using simple interest - Deducted from your loan advance on Day 1 - You receive less cash initially but owe less at exit - No monthly payments during term - Lower total interest cost (not compounded) - Example: £200k at 0.85% pm for 12 months = £20,400 interest deducted Day 1

Rolled-Up Interest: - Interest compounds monthly during the term - Added to your loan balance each month - You receive maximum cash on Day 1 (loan minus arrangement fee only) - No monthly payments during term - Higher total cost due to compounding effect - Example: £200k at 0.85% pm for 12 months = ~£21,350 total interest

The calculator compares both options side-by-side, showing the difference in Day 1 advance, gross redemption amount, and total cost of finance. Most experienced investors choose retained if they have sufficient equity, as it saves 5-10% on total interest cost. However, rolled interest is valuable when you need maximum cash upfront to complete a tight deal.

When to use this calculator

Use this calculator when comparing bridging loan quotes or deciding which interest structure works best for your project. Essential when you need to maximize Day 1 cash (choose rolled) or minimize total finance cost (choose retained). Particularly useful when you're tight on equity and need to see if retained interest leaves you enough working capital to complete your project.

Frequently Asked Questions

Common questions about this calculator

Choose retained interest when you have sufficient equity to cover the reduced Day 1 advance and want to minimize total cost. Retained saves 5-10% on interest costs compared to rolled due to simple vs compound interest calculation. Best for projects where you have comfortable working capital and want to maximize profit margin.
Choose rolled interest when you need maximum cash on Day 1 to complete your purchase and fund works. This is common for tight deals where every pound counts upfront. You will pay more overall due to compounding, but if the extra Day 1 cash means the difference between completing or not, the extra cost is worthwhile.
Rolled interest typically costs 5-15% more than retained due to monthly compounding. For example: £200k loan at 0.85% pm for 12 months = £20,400 retained vs approximately £21,350 rolled (around £950 extra). The difference grows with higher rates and longer terms.
Yes, most lenders allow early redemption with rolled interest - you only pay interest on the months actually used. However, some lenders charge minimum interest periods (typically 3 months) or exit fees. Early redemption with rolled can sometimes be cheaper than full-term retained.
Calculate your Day 1 cash requirement including all costs: purchase deposit, SDLT, refurb budget, fees, and contingency. If retained interest leaves you enough to complete comfortably, choose it to save money. If you would be cutting it too close, choose rolled for the extra cash cushion.

Related Property Terms

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