Dutch vs Non-Dutch Interest Calculator

What Dutch and non-Dutch interest mean

On a rehab or construction loan, part of the loan isn't paid out at closing. The lender holds it back and releases it in draws as the work gets done. The two interest methods differ only in how they treat that holdback before it's drawn:

• Dutch interest accrues on the full committed loan amount from the closing date, drawn or not.
• Non-Dutch interest accrues on the acquisition advance from closing and on each draw from the day it's funded.

That is how 15 of the 16 definitions we found describe them, from sources that include lenders, a loan servicer and a law firm's glossary. A few, quoted directly:

Two definitions stand out, and they can cause arguments at the closing table. LJC Financial (June 2025) describes Dutch interest as the full amount of interest charged up front at origination, which is closer to prepaid interest or an interest reserve. Fortra Law's glossary frames it as a method based on the project's risk assessment, while still charging on the full loan amount. If a term sheet just says “Dutch”, ask what it means in that lender's documents.

Other names for each method

The iPhone app avoids the bare word “Dutch” in its labels for this reason. The options are called Full Loan Balance and Funded Balance, and the in-app explanation says which one lenders often call Dutch. These calculators use “Dutch” only alongside the plain description.

How common is Dutch interest?

The only dataset we found comes from the American Association of Private Lenders. Its February 2025 “State of the Industry” report, using Lightning Docs loan data, found that of 8,832 bridge construction loans, 28% charged Dutch interest and 72% non-Dutch. The same report found that 38% of bridge loans had no construction holdback at all, and for those the distinction doesn't matter.

Treat any claim that “most lenders” use one method or the other with caution unless it cites data, and note the date and sample of any figure you rely on.

How the calculator works it out

Funded-balance interest uses the same rule as the app: split the term into periods of constant balance, then add them up.

For the Dutch side, the calculator runs the same engine as if the entire holdback were drawn on the closing date. That gives interest on the full loan on the same day count, so the only difference between the two figures is the undrawn holdback.

The app's Full Loan Balance option reports interest monthly instead: loan × rate ÷ 12 per month, $33,600.00 over 12 months in this example, with no day count. On Actual/365 a 12-month term usually spans 365 days, so the two full-balance figures agree here; on Actual/360 the day-count version is higher by the 365/360 ratio. The calculator shows both, labeled.

Worked example

Why draw timing matters

Under Dutch terms the draw schedule doesn't change the interest at all. Under non-Dutch terms it's the whole story: the later the money goes out, the less interest it earns. Here is the same $100,000 holdback drawn three ways:

For a borrower, slow draws under Dutch terms cost money every day the rehab funds sit unused. For a lender, Dutch terms pay a return on capital that is committed but not yet out the door. Whether that is fair depends on whether the lender actually has to keep the money available.

What to ask a lender

• Is interest charged on the full loan amount, or only on funds disbursed? (Get it in writing; don't rely on the word “Dutch”.)
• What day count does the note use? See Actual/360 vs Actual/365.
• If there is minimum interest, is it on the full commitment or the funded balance?
• How long do draw requests take to fund? Under non-Dutch terms, delays shift interest; under Dutch terms they don't.
• Is any interest reserve inside the loan amount, and does it accrue interest?