Non-Dutch Interest Explained: How It Works and When It Saves You Money

If you have asked a lender for a fix-and-flip quote, you may have seen the terms Dutch and non-Dutch in the paperwork.

Most borrowers skip over them. That is a mistake.

Dutch and Non-Dutch interest can produce very different carrying costs on the same loan amount, same rate, and same project timeline. In other words, the interest structure can change the real cost of capital even when the headline hard money loan rate stays the same.

In this guide, we’ll explain the difference between Dutch and Non-Dutch interest, how each one is calculated, and how the numbers change during a real fix-and-flip project. 

You can also use the interactive tool below to compare both structures side by side.

What Is Non-Dutch Interest?

Non-Dutch interest is a loan interest calculation method where the lender charges interest only on the portion of the loan that has actually been disbursed. The undrawn balance sitting in a rehab holdback accrues nothing until it is released. The structure goes by three names in the private lending market: non-Dutch, as-disbursed, and New York interest. All three describe the same mechanism.

If we look at the numbers from a real example from Ridge Street Capital’s portfolio, it will be clear how this works.

On a fix-and-flip project in Blue Springs, Missouri, Ridge Street funded a $393,000 loan at 11.25% interest. The loan included a $288,000 advance at closing and a $105,000 rehab holdback.

With non-Dutch interest, the borrower’s first monthly payment was $2,700 because Ridge Street charged interest only on the $288,000 advanced at closing.

As the borrower draws funds for renovation, the outstanding loan balance increases, and so does the monthly interest payment. Once Ridge Street releases the full $105,000 rehab budget, the borrower pays interest on the entire $393,000, the same amount a Dutch loan would charge from day one.

The savings come during the renovation, while part of the rehab budget remains undrawn.

For a broader fix-and-flip loan mechanics, including how rehab holdbacks and draws work, check our complete fix and flip loans guide.

What Is Dutch Interest? 

To understand how much non-Dutch interest saves, let’s compare it with Dutch interest, also called full-boat interest.

With Dutch interest, the lender charges interest on the full approved loan amount from day one, including renovation funds the borrower has not yet received.

Let’s use the same Blue Springs project above. On a $393,000 loan at 11.25%, Dutch interest would cost $3,684 per month from the first payment, regardless of how much of the $105,000 rehab budget the borrower has drawn.

That is $984 more in the first month than non-Dutch interest. The difference comes from charging interest on the full $393,000 instead of the $288,000 advanced at closing.

So why do some lenders use Dutch interest?

There are three practical reasons. 

1. First, the lender commits the full renovation budget upfront and holds the funds for future draws. 
2. Second, some lenders use a faster draw process that does not require new title updates or lien waivers before every release.
3. Third, many private lenders use investor capital to fund their loans. They have to account for the cost of that capital, including the portion committed to the renovation but not yet released. Basically, the funds are reserved aside for rehab draws, so they cannot be used to finance another loan.

In essence, Dutch interest buys the borrower certainty on draws and faster processing. The cost of that certainty is a monthly charge on capital the borrower has not yet drawn.

Dutch vs Non-Dutch Interest Comparison 

Dutch and non-Dutch interest result in different monthly payments. Over a longer renovation, those differences can add up to thousands of dollars. The table below compares how each structure works.

The next question is how much non-Dutch interest can save on a real fix-and-flip project.

Dutch vs Non-Dutch Interest Calculator 

Plug in your loan amount, initial advance, rate, and project length. The simple interactive calculator shows the monthly payment and total interest under each structure, side by side

When Non-Dutch Interest Is Actually Cheaper 

The savings depend on two things: how much of the loan is held for renovation and how long the project takes. At Ridge Street Capital, the rate is the same for Dutch and non-Dutch loans. That means non-Dutch interest costs less as long as some of the rehab funds remain undrawn.

The larger the rehab holdback and the longer the borrower takes to draw those funds, the more interest they save.

The two examples below show how much that difference can matter on actual and representative projects.

Scenario 1: Mid-size fix-and-flip (funded deal in Blue Springs, Missouri)

As mentioned above, Ridge Street Capital provided a $393,000 fix-and-flip loan (with a $105,000 rehab holdback) at 11.25%, 9-month projected hold, four phased draws tied to renovation milestones.

• Dutch total interest: $393,000 × 11.25% × (9/12) = $33,159
• Non-Dutch total interest (phased draws): approximately $29,220
• Non-Dutch savings at the same rate: approximately $3,940 over the life of the loan.

Scenario 2: Ground-up construction (illustrative, large holdback over long term)

A $500,000 ground-up construction loan with $100,000 funded at closing and $400,000 drawn evenly over 12 months at 10.5%.

• Dutch total interest: $500,000 × 10.5% × 1 year = $52,500
• Non-Dutch total interest (average outstanding balance of $300,000): $300,000 × 10.5% × 1 year = $31,500
• Non-Dutch savings at the same rate: approximately $21,000 over the life of the loan.

This is why ground-up construction, where committed balances sit undrawn for months, almost always runs on non-Dutch structures.

Run your own numbers against your deal with our fix and flip loan calculator before you choose a structure. The right question is which structure plus which rate costs less on your specific draw schedule and timeline.

How to Choose Between Dutch and Non-Dutch Interest 

Non-Dutch is usually the better choice when:

• The rehab holdback is more than 30 to 40% of the total loan.
• Project timeline is 9 months or longer.
• Ground-up construction with sequenced draws over a long drawdown window.
• Draws will realistically spread across the full term rather than front-load.

Dutch becomes the better choice when:

• Your lender quotes a materially higher rate for non-Dutch, which erases the interest savings.
• Fast draws matter more than monthly carry on speed-sensitive flips.
• The rehab holdback is a small share of the total loan and the hold period is short, so the non-Dutch savings would be minimal to begin with.

It’s advisable to run both numbers. A term sheet should disclose which structure applies and whether the quoted rate holds for the alternative. If it does not, ask. Investors new to this loan type can find a broader walkthrough of what to expect in our guide to fix and flip loans for beginners.

What to Ask Your Lender

You may be able to identify the interest structure in the term sheet.

If the lender uses phrases like “committed loan amount” or “interest on the face amount,” it usually means Dutch interest. The lender charges interest on the full loan from day one, including rehab funds that have not yet been released.

If the term sheet says “outstanding principal balance” or “interest on the disbursed amount,” it usually means non-Dutch interest. The lender charges interest only on the funds already released.

If the wording is unclear, ask the lender to confirm in writing whether interest is charged on the full approved loan or only on the amount drawn.

Before you sign, get clear answers to these six questions:

1. Is this quote Dutch or non-Dutch interest?
2. Are undrawn rehab funds held in escrow or available on request?
3. What is the typical draw processing time, and what is the per-draw fee?
4. Is there a loan-size minimum for non-Dutch? At Ridge Street Capital, non-Dutch is available on loans over $100,000.
5. If the project runs longer than planned, how does the interest calculation change?

The term sheet may not clearly state whether the lender uses Dutch or non-Dutch interest. For that reason, borrowers should ask the lender directly how interest is calculated before accepting the terms.

Hybrid and No-Payment Interest Structures 

Some hard money lenders offer a hybrid: Dutch interest on the initial advance and non-Dutch on the rehab holdback. The structure captures the escrow advantage on the committed capital while giving the borrower draw-side savings on the holdback. These are less common but worth asking about when the deal has a large initial advance and a substantial rehab budget.

A separate variation is the "no monthly payment" structure, where interest accrues against the balance and gets paid at payoff from sale or hard money refinance proceeds. These exist primarily for ground-up construction and heavier rehab deals where the investor wants zero carry during the build phase, and they almost always run on a non-Dutch calculation of accruing interest. 

Dutch and Non-Dutch Interest at Ridge Street Capital 

Ridge Street Capital offers non-Dutch interest on fix-and-flip and ground-up construction loans over $100,000. Because we quote the same rate under both calculation methods, borrowers who qualify for non-Dutch always carry lower total interest than they would under Dutch on the same deal. 

If you have a project in underwriting and want a term sheet that shows both options side by side, submit a quick application and we will issue preliminary terms within two business hours.

Frequently Asked Questions

Why is it called Dutch interest?

The term traces to 17th-century Amsterdam, when the Netherlands sat at the center of global finance and Dutch banks pioneered many of the lending conventions still in use today. During that period, merchants financing long maritime voyages needed capital reserved for their specific trade, which meant Dutch lenders had to lock the committed sum away from any other use.

In exchange, those lenders charged interest on the full committed amount from the day the contract was signed rather than from the day the merchant actually spent the gold. The practice is also commonly called “full-boat interest” in modern private lending, a nickname that captures the mechanic plainly: the lender charges on the entire approved amount from day one, with nothing held back. 

The convention carried into modern construction and rehab loans: when a private lender escrows a rehab holdback that cannot be lent to anyone else, charging interest on the full committed balance from day one echoes the same practice.

Is non-Dutch interest the same as New York interest?

Yes. Non-Dutch, as-disbursed, and New York interest all describe the same structure: interest charged only on funds actually drawn. The regional terminology comes from the New York construction lending market, where the as-disbursed convention has long been the standard for commercial projects.

Do banks and institutional lenders use Dutch interest?

Rarely. Commercial banks, credit unions, and large institutional construction lenders typically charge on drawn funds because their capital base is diversified and does not depend on earning yield from a specific commitment. Dutch interest is primarily a private lender structure tied to fund economics and investor return obligations.

Can I negotiate from Dutch to non-Dutch mid-loan?

Generally no. The interest structure is set at closing and locked into the loan documents. The time to negotiate is before you sign the term sheet, which is why asking about both options early matters. Lenders are typically willing to re-quote during the term sheet phase but not after closing.

Is Dutch interest tax deductible the same as non-Dutch?

For investment property, mortgage interest actually paid is generally deductible as a business expense regardless of calculation method. The structure affects your total interest paid, not whether that interest is deductible. Confirm specifics with your CPA, since tax treatment depends on how the entity holding the property is structured and how your overall return is reported.

What is the effective interest rate on a Dutch interest loan?

The quoted rate overstates what the borrower actually pays against the capital they hold. On the Blue Springs case above, 11.25% quoted under Dutch works out to an effective rate near 12.8% once you measure interest paid against the average money actually drawn across the 9-month hold. 

Non-Dutch at the same 11.25% quote stays at 11.25% effective because the interest base and the drawn balance track together. The gap widens on larger holdbacks and longer holds because more of the loan sits undrawn for more of the project. For a rough check on any term sheet, divide total expected interest by the average outstanding balance across the loan term.

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