Fix and Flip Dutch vs Non-Dutch Interest: What You Actually Pay on Undrawn Rehab (2026)
There is a feature buried in a lot of fix and flip loans that can change your real interest cost by thousands of dollars, and most investors never ask about it because they do not know it exists. It is whether your loan charges interest on the full loan amount or only on the money you have actually drawn. The industry calls the first version Dutch interest and the second one non-Dutch, or sometimes as-disbursed interest. The names are strange, the difference is real, and understanding it is the difference between an interest estimate that holds up and one that runs high the whole project. This guide explains both structures, runs the math side by side, and tells you what to ask before you sign.
This sits right next to two costs we have covered before. It builds on how the rehab money reaches you through a draw schedule, and it interacts with the interest reserve that many loans use to cover payments during the rehab. Read those together and the Dutch-versus-non-Dutch distinction clicks into place.
How the two structures differ
Start with how a fix and flip loan is built. The loan has two parts: the purchase money, which funds at closing, and the rehab money, which is held back and released in draws as you complete the work. On day one, you have the full purchase amount outstanding but none of the rehab money, because you have not done any work yet. The rehab balance fills in over the following weeks and months as you draw it.
Non-Dutch, or as-disbursed, interest charges you only on what you have actually drawn. In the early weeks, when most of the rehab money is still sitting undrawn at the lender, you pay interest on a smaller balance, and your interest bill rises as you pull the rehab funds. Dutch interest charges you on the full loan amount, purchase plus the entire rehab holdback, from the day the loan closes, even though most of the rehab money is not in your hands yet. You are paying interest on money you cannot use until you draw it. That is the whole difference, and it is entirely about the undrawn rehab portion in the early part of the project.
Running the math on a real deal
Numbers make this concrete. Say you have a fix and flip loan with two hundred thousand dollars of purchase money and one hundred thousand dollars of rehab money, three hundred thousand dollars total, at an eleven percent rate. Your rehab runs six months, and you draw the one hundred thousand dollars in roughly equal pieces across those months, so your average drawn rehab balance over the project is about fifty thousand dollars.
On a non-Dutch loan, you pay interest on the two hundred thousand dollar purchase balance the whole time, plus interest on your actual drawn rehab balance, which averages around fifty thousand dollars. So your average balance charged is roughly two hundred fifty thousand dollars. Eleven percent on two hundred fifty thousand dollars for six months is about thirteen thousand seven hundred fifty dollars of interest.
On a Dutch loan, you pay interest on the full three hundred thousand dollars from day one, regardless of what you have drawn. Eleven percent on three hundred thousand dollars for six months is about sixteen thousand five hundred dollars. The Dutch structure cost you roughly two thousand seven hundred fifty dollars more on the exact same deal at the exact same rate, purely because you paid interest on rehab money that spent most of the project sitting undrawn. Stretch the timeline or make the rehab portion larger relative to the purchase, and that gap widens.
This is exactly the kind of hidden difference that a headline rate hides. Run your own numbers through our deal calculator, and when you compare two loans, make sure you know whether each one is quoting Dutch or as-disbursed interest, because the same rate can produce very different total costs.
When the gap gets bigger
The two thousand seven hundred fifty dollar difference in the example was on a deal where the rehab was one third of the loan. The more rehab-heavy your deal is, the wider the Dutch penalty grows, because Dutch interest charges you on the entire rehab holdback from day one and a bigger holdback means more undrawn money accruing interest early. Take a heavier project: one hundred fifty thousand dollars of purchase money and one hundred fifty thousand dollars of rehab, still three hundred thousand dollars total at eleven percent over six months, with the rehab drawn evenly so your average drawn rehab balance is about seventy-five thousand dollars.
On the as-disbursed loan, your average balance charged is the one hundred fifty thousand dollar purchase plus roughly seventy-five thousand dollars of average drawn rehab, about two hundred twenty-five thousand dollars, for around twelve thousand four hundred dollars of interest over six months. On the Dutch loan you pay on the full three hundred thousand dollars the whole time, about sixteen thousand five hundred dollars. Now the gap is roughly four thousand one hundred dollars on the same rate, up from two thousand seven hundred fifty on the lighter-rehab version. The lesson is that Dutch interest hurts most exactly where investors lean hardest on rehab financing, so the heavier your draw portion, the more the interest structure deserves your attention.
Why lenders use Dutch interest, and why it is not automatically bad
It is tempting to read Dutch interest as a pure gouge, but it is more of a pricing choice than a trap. A lender who charges Dutch interest is earning more over the life of the loan, and a lender who charges as-disbursed is earning less, so the two are often priced to partly offset. A Dutch loan may come with a slightly lower rate or fewer points, and an as-disbursed loan may carry a slightly higher rate to make up for the interest the lender is not collecting on the undrawn balance. The structures are two ways of getting paid, and neither is inherently a better deal until you run your specific numbers.
What makes Dutch interest dangerous is not the structure itself but the surprise. An investor who assumes as-disbursed interest, models the cheaper number, and then signs a Dutch loan is going to be over budget on interest for the entire project. The fix is not to avoid Dutch loans on principle. It is to know which one you have, price it correctly, and compare offers on total dollars rather than on the rate alone.
How it interacts with your reserve and your draws
If your loan funds its own payments through an interest reserve, the Dutch-versus-non-Dutch choice changes how fast that reserve drains. A Dutch loan charges more interest each month, so a reserve sized for as-disbursed interest will run dry faster than you expect, and you may be covering payments out of pocket sooner than planned. When you size a reserve, size it to the interest structure you actually have.
Your draw discipline matters more on an as-disbursed loan and less on a Dutch one. On a non-Dutch loan, pulling draws only as you need them keeps your average balance and your interest down, so the same careful sequencing that we recommend for managing carry pays off directly. On a Dutch loan, you are charged on the full balance no matter when you draw, so draw timing does not lower your interest, though it still matters for your working capital. Knowing which loan you have tells you whether draw discipline is saving you real interest or just managing cash flow.
Questions to ask before you sign
This whole issue comes down to three questions at the quote stage. First, is the interest on this loan charged on the full loan amount or only on the funds I have drawn. Second, if it is charged on the full amount, is the rate or the points lower to reflect that. Third, how is any interest reserve sized, and does it assume the full balance or the drawn balance. The answers let you drop an accurate interest number into your model instead of a hopeful one, and they let you compare a Dutch loan and an as-disbursed loan on the same honest footing. Two loans at the same rate are not the same loan if one charges you for money you have not touched.
Where FMC fits
We arrange fix and flip and bridge financing for real estate investors across Pennsylvania and additional states, and we are a Pittsburgh-based brokerage placing these loans throughout our service area. Part of that job is making sure you know whether a loan charges Dutch or as-disbursed interest and what that does to your total cost, so the number you model is the number you pay. Run your numbers through our deal calculator, then contact us and we will tell you exactly how the interest is structured on the fix and flip loan options for your deal.
FMC Capital is a Pittsburgh-based mortgage brokerage, NMLS #1840537, serving real estate investors across Pennsylvania and additional states. This article is educational and is not a commitment to lend or financial advice. Interest structures, rates, and program terms vary by lender, property, and borrower and are subject to change. To talk through a specific project, call 412-990-2941.