In one sentence
Loan proceeds set aside to pay interest during a period when a property does not yet generate enough cash flow, common in construction and bridge loans.
The longer version
When a property is under construction or leasing up, it cannot cover debt service, so the loan funds its own interest from a reserve sized in underwriting. When the reserve runs dry before stabilization, trouble follows.
Interest reserve burn is a monitored servicing metric on transitional loans, because it is an early signal of a business plan running behind.
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