Interest Rollover for Dynamic Mortgages
Interest rollover keeps a borrower's monthly repayment equal on a Dynamic Mortgage loan even in months where more interest accrues than usual. Instead of increasing the instalment for that month, the excess interest is deferred and carried forward to the next instalment — keeping the repayment predictable and consistent.
This applies to equal-instalment (annuity-style) dynamic mortgage loans where payment due dates can shift because of non-working days, manual due date edits, interest rate changes, or fee capitalisations.
The problem it solves
Dynamic mortgages are typically sold to borrowers with the promise of equal monthly repayments. However, if a payment due date falls on a holiday or weekend, the due date shifts forward, which means interest accrues over a slightly longer period than usual. The standard system behaviour would increase that month's instalment to collect the additional interest — breaking the equal-instalment promise.
Interest rollover fixes this: when the accrued interest for an instalment exceeds the fixed payment amount (PMT), the instalment total is capped at the PMT. The excess interest is tracked as ExcessInterestRollover and is added to the interest due on the following instalment.
How it works
Core logic
- Normal instalment: If accrued interest ≤ PMT, the instalment collects all interest as usual — no rollover occurs.
- Rollover instalment: If accrued interest > PMT, the Total Due is capped at the PMT. The difference (
ExcessInterestRollover) is carried forward to the next instalment. - Subsequent instalments: The rolled-over excess is added to the interest due for the next period. If this again causes interest to exceed PMT, the process repeats.
- Final instalment: The Total Due is permitted to exceed PMT in order to clear all outstanding balances, including any accumulated excess interest.
- Payoff: All uncollected excess interest rollover is included in the payoff amount, ensuring the loan is fully settled.
What triggers a rollover
A rollover can occur any time accrued interest for an instalment exceeds the PMT. Common triggers include:
- Non-working day shifts — a due date moves forward past a weekend or public holiday, extending the accrual period.
- Manual due date edits — where the product is not configured to adjust Total Due for the affected instalment.
- Interest rate increases — after the threshold, if a rate increase causes accrued interest to exceed the current PMT.
- Fee capitalisations — where capitalised fees cause interest to exceed the PMT. For more information, see Fee Capitalization.
Interactions with other features
Manual due date adjustments (broken interest)
When a due date is manually overridden and the product is configured to adjust Total Due — via Adjust the total due of the first repayment or Adjust the total due of repayments with different interval — the Total Due adjustment takes priority over rollover. In this scenario, the instalment is adjusted instead of rolling over the excess. Interest rollover applies when these adjustment settings are disabled.
Payment holidays
Interest rollover does not apply during payment holidays. Interest accrued during a payment holiday period is capitalised to the principal balance rather than being rolled over. There is no rollover behaviour on instalments marked as payment holidays. For more information, see Payment Holidays.
Compound interest
When the loan uses compound interest, interest that is rolled over is included in the compounding effect. For more information, see Compound interest with daily rest.
Payoff and custom repayments
- On payoff, any outstanding interest balance is collected in full.
- Custom repayments targeting interest are supported. If the total interest paid via a custom repayment is greater than or equal to the scheduled interest (PMT) and no principal remains outstanding on that instalment, the instalment is marked as paid and the interest rollover for that period is zeroed.
Payment allocation
When the payment allocation order is set to Principal First, rolled-over interest is treated as part of regular interest in the allocation order. Principal is paid first, then interest (including any rollover component). For more information, see Repayment allocation order.
Visibility in Mambu
Schedule view
A dedicated Interest Rollover column is displayed in the instalment schedule. This column:
- Only appears on Dynamic Mortgage accounts.
- Is only shown when at least one instalment has an
ExcessInterestRolloveramount greater than zero. - Shows the excess interest carried forward from each instalment where a rollover occurred.
Preview schedule
The interest rollover field is also reflected in the Preview Schedule, both in the UI and via the API, so users can see the projected rollover amounts before a loan account is saved.
Loan account details
The ExcessInterestRolloverEnabled status is displayed on the loan account details view, indicating whether rollover is active for that account.
Schedule and Preview Schedule APIs
The ExcessInterestRollover field is included per instalment in the schedule and preview schedule API responses, showing the amount of excess interest deferred from each instalment.
Worked example
Consider a borrower with a 25-year dynamic mortgage with equal monthly instalments (PMT = £1,000). Instalment 6 falls on a Sunday, so the due date is moved to Monday — giving one extra day of interest accrual.
| Instalment | Interest accrued | PMT cap | Total Due | Excess rolled over |
|---|---|---|---|---|
| 5 | £850 | £1,000 | £1,000 | £0 |
| 6 (rollover) | £1,040 | £1,000 | £1,000 | £40 |
| 7 (recovery) | £860 + £40 rollover = £900 | £1,000 | £1,000 | £0 |
The borrower pays £1,000 in every period. The £40 of excess interest is collected as part of instalment 7's interest component without changing the payment amount.
Frequently asked questions
What happens if rollovers accumulate across multiple consecutive months?
The entire accumulated rollover is added to the next instalment's accrued interest in one go (interestAccrued + previousRollover). If that sum still exceeds PMT, a new rollover is generated for the period after that. It is not spread out progressively — it is added in full to the immediately following instalment and either absorbed or re-rolled.
Does the borrower ever pay more overall?
The total amount paid over the life of the loan remains the same. The excess interest is not forgiven; rolled-over interest is included in the interest balance — it is deferred into future instalments and fully collected, including at payoff.
Can a borrower pay off the rolled-over interest early?
Yes. A borrower can make a repayment targeting interest to pay the rolled-over interest in advance of the scheduled collection date.
What happens when a payment holiday is applied to an account with rollover?
Interest during the payment holiday is capitalised to the principal rather than rolled over. There is no rollover behaviour on payment holiday instalments.
Is rollover shown in the schedule before a loan is saved?
Yes. The preview schedule reflects the interest rollover logic, both in the UI and via the preview schedule API.