2007-11-02 22:13:49 · 2 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
capitalizing interest means that the unpaid interest or interest in arrears are converted to form part of the principal loan.
2007-11-02 22:19:19 · answer #1 · answered by Rhythm of the Falling Rain 7 · 0⤊ 0⤋
On a bridge loan you normally don't make any payments for a specified period of time, typically 6 months. Any interest coming due during the deferral period (the time you aren't making payments) is added on to the loan principal.
Once this interest is added on to the principle it will start to accrue interest itself if the loan documents state that it is capitalized. If it does not state that it is capitalized then it accrues as simple interest and while it does increase the outstanding balance of the loan, it does not attract interest itself.
2007-11-03 07:45:29 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋