No Interest Until Sale refers to a structured deferred-return debt facility where no interest is payable during the term of the property development project. Instead, all interest is capitalised and paid in one lump sum at the point of asset disposal or refinance. It’s a cashflow-friendly tool in UK property development finance, particularly useful for SME developers managing multiple phases or delayed sales. This approach offers predictable debt costs without interim servicing requirements, though the rolled-up interest can affect final returns if not carefully structured.
Within the capital stack, this structure sits under Structured Deferred-Return Debt, but is specifically tailored to maximise short-term liquidity by removing any requirement for periodic interest servicing. It is often evaluated alongside Deferred Interest to Exit, although the absence of interim triggers makes it more sensitive to timing risk and exit execution. Lenders typically mitigate this through legal protections such as Power of Sale, ensuring recovery options if disposal is delayed. From a feasibility perspective, developers should closely monitor Sales Velocity Sensitivity, as slower sales directly increase rolled-up interest and can materially erode projected profit margins.
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