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You are here: Home / Bridging Loans / Bridging Loan Rolled Up Interest or Serviced?

by Payam Azadi

Bridging Loan Rolled Up Interest or Serviced?

How to pay for bridging loan

Rolled up Interest for Bridging Loan or serviced Interest how they work

If you are looking to take out bridging Loan one of the main decisions is whether to have rolled up interest or service payments. The choice between rolled up interest or service payments runs to the heart of the profitability and cash-flow of your project.

GET A FREE BRIDGING LOAN QUOTE

In this article I explore the main differences between rolled up interest and service payments to help you make the decision that suits you for your bridging finance. It is also in your best interests to seek the advice of a professional finance broker, such as Niche Advice.

If you are to choose rolled up interest the amount that will be advanced to you on day 1 to undertake your project will be reduced as the equivalent interest payments to service the loan over the term will be taken up front, and common bridges run for 6 months to 12 months so that can be a significant chunk particularly on large projects.

Your status becomes less important on rolled up interest as the lender does not need to know you are good for the repayment of the interest payments as they have already been taken.

If you take a rolled up interest bridge and you repay the bridge before the term ends the interest payable on the unused term will normally be repaid, for example if you take a 12 month bridge and repay after 9 months normally an amount equivalent to 3 months payments will be refunded.

The choice of rolled up interest or service payments will not necessarily improve your exit routes but it follows that if you are looking to remortgage the debt that the transition to a mortgage may be easier for you as you’ll be used to servicing payments (and normally at a higher price), and your qualification for a mortgage may be more assured as you have already passed through bridging underwriting process. 

Table 1: Main differences between rolled up interest and service payments.

Rolled Up InterestServiced Payments
Net amount advanced day 1LessMore
Occupation and incomeLess importantMore important
Past credit historyLess importantMore important
Supporting documentationLessMore
UnderwritingLess importantLess important
Speed of processFasterLess fast
Does experience countSameYes
Does it improve your exit choicesNoNo

Table 2: Net loan. Example of the amount released between rolled up interest on day 1.
Based on a property value of £150,000. Gross bridging loan £112,500 (75%LTV).
Interest rate 0.85%pcm. Lender arrangement fee 2% and insurance fee £150. CHAPs fee £25.

Serviced InterestRolled up 3 month InterestRolled up 6 month InterestRolled up 12 month Interest
Amount released on day 1£110,075£107,206£104,337£98,600

So draw a conclusion here the service payments has the advantage of £11,475 over a 12 month bridge to use day 1 on the project. This money upfront could be used to increase your labour and get the project completed quicker or for instance a refurb of kitchen, bathroom and set of windows.

Niche Advice offers bridging loans to those in need to purchase a property quickly.

  • Free Quote
  • No upfront broker fees
  • Broker fees of £499 inc VAT for standard cases paid on completion of the deal
  • Auction, Bridging and Development Finance in one place.
  • Experienced Brokers watch our Youtube channel to learn more
  • A hand picked panel of reputable Bridging Loan lenders
  • Loans from £50,000 to £20,000,000
  • Residential, Buy to Let and Commercial Finance Exit routes
  • First Time Buyers Auction Finance
  • First Time Landlords Auction Finance
  • Light Refurbishment products offered for “flipping”
  • Bridge to Let Product to give landlords certainly and comfort
  • Complex Income structure
  • Lending on the end value
  • Regulated and Unregulated Loans
GET A FREE BRIDGING LOAN QUOTE
Payam Azadi

Author: Payam Azadi

Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines. To get in contact with him please click here.
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Filed Under: Bridging Loans

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AS A MORTGAGE IS SECURED AGAINST YOUR HOME OR PROPERTY, IT COULD BE REPOSSESSED IF YOU DO NOT KEEP UP THE MORTGAGE REPAYMENTS.

If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.

Niche Advice Limited is a Credit Broker and does not lend money directly to clients. Niche Advice Limited is authorised and regulated by the Financial Conduct Authority. FCA Number: 750263.

Commercial Buy-to-Let and commercial mortgages are not regulated by the Financial Conduct Authority.

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