retained interest
Interest deducted at drawdown for the whole term rather than paid monthly, which reduces the cash released.
Retention suits a borrower with no rental income during the works, because there is nothing to service. It is not free: the interest is charged on the full facility for the full term whether or not the project runs to time.
An early exit does not always refund it. Whether unused retained interest is rebated is a term of the facility, and it is worth reading before comparing two lenders on headline rate alone.
Where this comes up
- Net advance: what a bridging facility really releases
A facility is not a cash sum. Where interest is retained it is deducted at drawdown, so the net advance is smaller than the headline. A capital stack…
- Below market value is not the same as a discount
The headline discount ignores stamp duty, finance, works and selling costs. True discount counts every pound deployed, and it is almost always worse.