Interest Rates for Bridging Loans: Why Retained Interest Cuts Your Net Advance

Most borrowers searching for interest rates on bridging loans are here because a bank has already said no. The figure that comes back looks simple: a monthly rate, a loan size, an LTV. Term sheets here are issued within 24 hours of a complete enquiry, and drawdown usually takes about two weeks.

It is not the figure that lands in your account. If you cannot service interest from income, and most TDSR-blocked borrowers cannot, the interest is retained at drawdown. The gross facility and the net advance are two different numbers.

A cheaper headline over a long tenor can leave you with less cash than a higher rate over three months. That is the arithmetic brokers actually run.

Gross facility versus the cash that lands

Where a borrower cannot service interest monthly, a private bridge in Singapore is often structured with retained interest. You do not pay a monthly debit. The lender deducts the contracted interest from the facility on day one.

Take a $10 million gross line at up to 70% LTV on a property worth about $14.3 million. That 70% is the gross cap, not the wire.

Using a hypothetical rate of 1.00% a month retained across 12 months, $1.2 million is deducted at drawdown. You receive $8.8 million. Cash against the asset sits closer to 61.5% LTV, not 70%.

Arrangement fees, if deducted, would cut it further. Live terms are indicative and subject to valuation and due diligence.

The rates used in this piece are hypothetical inputs chosen to show the arithmetic. They are not Rikvin's rates. For the mechanics in full, see how interest retention reduces your bridging loan proceeds.

For a TDSR bridging loan, this structure is the point. We lend against the asset and the exit because the TDSR framework would otherwise gate the file on income you do not have.

Tenor can cost you more than the headline rate

Borrowers fixate on the monthly rate. Tenor is often the larger lever on net cash.

Keep the $10 million gross. Using a hypothetical rate of 1.25% a month for three months, retained interest is $375,000 and the net advance is $9.625 million.

Using a hypothetical 0.85% a month for twelve months, retained interest is $1.02 million. You receive $8.98 million. The cheaper-looking line puts roughly $645,000 less in your account.

That is why we ask when the exit actually completes, not how low the rate can go. A sale with a signed Option to Purchase in four months does not need a twelve-month line.

If you want the file run on your numbers, see how the lending process works from enquiry to drawdown. Term sheets are usually issued within 24 hours, and drawdown typically takes about two weeks.

What prices interest rates for bridging loans

The rate is not a menu. It tracks LTV, asset quality, title, and how hard the exit is.

A first-charge Good Class Bungalow with a contracted sale is a different file from a tightly geared shophouse with a hoped-for refinance. Cleaner security and a dated exit price keener. A thin exit or a higher LTV prices wider.

Compare that with a bank. A bank is underwriting income; we are underwriting the asset. That is why a private bridge versus a bank facility can complete when TDSR will not.

It is also why the cost is higher, and why that cost should cover a short, known window. Related: the Holland Road prime residential bridge was sized around a dated exit, not a long tenor.

When a retained-interest bridge is the wrong tool

A bridge is the right tool when you have a credible exit inside 3–24 months and a completion date that needs funding within weeks. It is the wrong tool if the exit is a hope. It is also the wrong tool if you can wait for a term loan, or if you need every dollar of the 70% LTV as cash on a long tenor.

The main risk is mismatch. Interest is retained up front on the contracted tenor. If the sale slips, you may need an extension, and you have already taken a smaller net advance than the gross line implied.

You still repay the gross. Do not use a twelve-month line with retained interest to keep options open if a three-month window is real.

You would be retaining interest for months you may not need, and starving the completion statement. Unused retained interest is refunded if you repay early, though a minimum interest period can apply, but that cash is still missing on completion day.

If the income test is the only blocker, a bridge without TDSR is the cleaner frame. For product choice across asset types, start with Singapore bridging loans and size every offer on net proceeds.

We lend only to accredited investors and corporates. Rikvin Capital is a direct private lender and an excluded moneylender under the Moneylenders Act, not a bank.