Retained Interest Bridge Loans

What is a Retained Interest Bridge Loan?

A retained interest bridge loan is a type of short-term financing where the interest for the entire loan term is deducted from the loan amount at the beginning. This means you don't make monthly interest payments; instead, the interest is "retained" and settled at the end of the loan term.

Key Features:

• No Monthly Payments: Since the interest is deducted upfront, there are no monthly interest payments to worry about.
• Lump Sum Repayment: Both the principal and the retained interest are repaid at the end of the loan term.

Benefits:

• Simplified Cash Flow Management: With no monthly interest payments, managing cash flow becomes easier.
• Flexibility: Ideal for borrowers who need short-term financing without the burden of monthly payments.

Considerations:

• Higher Initial Loan Amount: The loan amount is increased to cover the retained interest.
• Repayment Strategy: It's crucial to have a clear plan for repaying the principal and retained interest at the end of the term.

Gross Loan Value:

• Gross Loan Value: This represents the total amount borrowed, including all additional costs such as arrangement fees and retained interest. It is the overall amount the lender provides, which will be repaid at the end of the loan term
• Net Loan Value: This is the amount you receive after the deduction of retained interest and any other fees. The net loan value is typically lower than the gross loan value