Rolled-up interest means you make no monthly payments on a bridging loan. Each month's interest is added to the balance and you repay the lot in one go when you sell or refinance. Because most lenders compound it monthly, rolling up costs a little more than paying the same rate every month. On a £200,000 bridge at 0.85% a month for 9 months, rolled-up interest comes to £15,831 against £15,300 if you pay monthly.
That difference is often worth paying. During a refurbishment the property usually earns nothing, and keeping cash free for the works can matter more than saving a few hundred pounds. The key is knowing exactly what you are signing up for before the lender's offer lands.
Key Takeaways
- Rolled-up interest is paid at exit, so a bridging loan with rolled-up interest has no monthly payments at all.
- Most lenders compound rolled-up interest monthly, which makes it slightly dearer than serviced interest at the same rate.
- Retained interest is deducted on day one, so you receive a smaller advance but the balance does not grow.
- Compare bridging loans on total cost of finance, meaning all interest plus all fees, not the headline monthly rate.
- A late exit is the biggest risk with rolled-up bridging interest, because the balance keeps growing every extra month.
What is rolled-up interest on a bridging loan?
A bridging loan is short-term property finance, usually for 3 to 18 months, used to buy quickly, fund a refurbishment or bridge a gap until a sale or a longer-term mortgage. Lenders quote a monthly interest rate, and they offer three ways to pay it:
- Serviced interest: you pay the interest every month from your own cash, like an interest-only mortgage. The balance stays flat, and the lender will check you can afford the payments.
- Rolled-up interest: nothing is paid monthly. Interest is added to the balance each month and settled in full at exit.
- Retained interest: the lender calculates interest for an agreed number of months up front and holds it back from the advance. You get less cash on day one, make no monthly payments and repay the gross loan at exit.
Rolled-up and retained interest are popular for refurbishments, auction purchases and unmortgageable properties, because the property often produces no income until the works are finished. Think of rolled-up interest like a bar tab: you don't pay as you go, but the bill at the end includes everything.
How is rolled-up interest calculated?
Most bridging lenders calculate rolled-up interest monthly and compound it, so each month's interest is charged on the loan plus all the interest added before it. Some charge rolled-up interest on the original loan only (simple interest), which is slightly cheaper. Always ask which method the lender uses.
Step 1: Start with the gross loan
Take the amount you borrow, including any fees the lender adds to the loan. In our example that is £200,000, with the 2% arrangement fee paid at completion instead of added.
Step 2: Apply the monthly rate
Multiply the balance by the monthly rate. At 0.85% a month, month one's interest on £200,000 is £1,700.
Step 3: Add the interest to the balance
The £1,700 joins the loan, so month two's interest is charged on £201,700. Repeat for every month you hold the loan.
Step 4: Add the fees
Add the arrangement fee, any exit fee and other charges to the interest to get your total cost of finance. This is the number to compare between lenders.
After 9 months, our £200,000 bridge has grown to £215,831. That is the amount you need your sale or refinance to cover.
How do rolled-up, serviced and retained interest compare?
Here is the same bridge under each option.
Assumptions: £200,000 gross loan, 0.85% a month (10.2% a year), 2% arrangement fee (£4,000) deducted at completion, redeemed after 9 months, no exit fee.
| Interest type | Cash you receive on day one | Monthly payment | Interest paid | Balance to repay at exit | Total cost of finance |
|---|---|---|---|---|---|
| Serviced | £196,000 | £1,700 | £15,300 | £200,000 | £19,300 |
| Rolled-up (compounded) | £196,000 | £0 | £15,831 | £215,831 | £19,831 |
| Retained | £180,700 | £0 | £15,300 | £200,000 | £19,300 |
Compounding adds £531 over 9 months here. That is the price of not paying monthly. Retained interest costs the same as serviced on paper, but you start with £15,300 less cash. On a deal that needs the full amount, that means borrowing more and paying fees on a bigger loan.
Which bridging interest option should you choose?
There is no single best option. It depends on your cash flow during the bridge and how certain your exit is.
| Your situation | Usually the best fit | Why |
|---|---|---|
| The property earns rent from day one | Serviced | Lowest total cost, and the rent covers the payments |
| No income during a refurbishment | Rolled-up | Keeps your cash free for the works |
| The lender offers a better rate for it | Retained | Fixed cost up front, no growing balance |
| Your exit date is uncertain | Serviced, or rolled-up with a large equity cushion | Limits how far the balance can grow |
Whichever you choose, judge the bridge by the total cost of finance and the balance due at your realistic exit date. A lower rate with higher fees, or a long minimum interest period, can cost more.
What happens if your exit is late?
With rolled-up interest the loan grows every month you stay in it. If the refurbishment overruns by three months, you pay three more months of compounding interest on an already bigger balance.
Lenders cap the gross loan, including rolled-up interest and fees, at a maximum loan-to-value (LTV), commonly around 70 to 75% of the property value. A long overrun can squeeze the equity you need to refinance onto a buy-to-let mortgage, and some lenders charge default interest after the term ends. Model a "late exit" scenario before you commit, and keep a contingency.
What does a bridging loan cost in 2026?
These are typical ranges for mainstream UK deals, not quotes:
- Monthly interest rates: roughly 0.85% to 1.25% a month, depending on LTV, the property and the borrower.
- Arrangement fee: usually 1% to 2% of the loan.
- Exit fee: 0% to 1.5%, and many lenders charge none.
- Maximum LTV: commonly up to 70 to 75% for standard bridging.
Some bridges track the Bank of England's Bank Rate rather than charging a fixed rate, so your cost can move during the loan. Rates change often, so always get a quote from a broker or lender before relying on these figures.
Frequently Asked Questions
The Bottom Line
Rolled-up interest trades a slightly higher cost for no monthly payments, which suits refurbishments where the property earns nothing. Compare bridges on total cost of finance and balance at exit, and plan for a late exit before you sign.