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Retained vs Serviced Interest on Bridging Loans
Retained interest is deducted upfront from your net advance — no monthly payments. Serviced interest requires monthly payments but gives you a larger net advance. The right choice depends entirely on your cash flow during the project.
On a £500,000 bridging loan at 1% per month for 12 months, retained interest totals £60,000 — deducted upfront, giving a net advance of £440,000. Serviced interest means you receive £500,000 but pay £5,000/month. If you have income during the project (e.g. rental from other properties), serviced can work. If you are mid-refurbishment with no income, retained eliminates cash flow risk entirely. Phantom Finance models both scenarios for every client before recommending.