Bridging interest gets handled in one of three ways: rolled up, retained, or serviced. Same loan, same rate — very different cash flow. Most borrowers take rolled-up, many are quoted retained without realising it, and only a minority pay monthly. Knowing which you're being offered matters more than a few basis points on the rate.
Rolled-up: pay at the end
Interest is added to the balance each month and the whole lot is repaid at exit. No monthly outgoings, which is the point — the money for the works stays in the works. The catch is compounding. Each month's interest is charged on the previous balance including interest, so a £300,000 loan at 0.9% costs not £2,700 twelve times but a curve that ends around £33,900. Modest on paper. Real when the exit slips.
Retained: pay at the start
The lender calculates the full term's interest on day one and deducts it from the advance. You borrow £300,000, they hold back the year's interest, and you receive the difference. The rate often looks slightly cheaper this way, but your day-one cash is smaller, and the crucial question is what happens if you repay early. Some lenders refund the unused months in full. Some refund part. A few keep it. That single clause can be worth more than the rate difference, so read it before you sign, not after.
Serviced: pay monthly
You pay the interest each month, like an interest-only mortgage, so the balance never grows and your net advance is the biggest of the three. In return the lender wants proof you can afford the payments — which brings income underwriting back into a product most people choose to avoid it. Serviced bridges suit borrowers with strong rental income who want maximum leverage; they're the minority of what we arrange.
Choosing between them
It's a cash-flow decision, not a cleverness contest. Money tight during the works: roll it. Maximum day-one advance and provable income: service it. Offered retained: price the early-repayment clause as carefully as the rate. On a £300,000 bridge the gap between the best and worst structure for your situation is routinely five figures.
Ask every lender for a projected redemption statement at months six, nine and twelve before you commit. One page of numbers tells you more than any rate card — and the lenders who produce it happily tend to be the ones worth borrowing from.