With an interest-only mortgage, your monthly payment will only cover the Interest charge on your mortgage and your actual mortgage balance (or capital) will not reduce. Therefore, at the end of the mortgage term, your balance will be the same as the original amount borrowed.
With capital repayment, you will not only be covering the interest charge but also some of the capital borrowed each month, which means that as long as you keep up with repayments, your mortgage will be paid off at the end of the mortgage term.
A bridging loan is taken out to ‘bridge’ the gap between the purchase of a new property and the sale of an existing one – usually when you are moving home. The loans are generally short term and secured on the existing property but repaid once the current property is sold.
In a commercial sense, Bridging Finance is more commonly used to buy a property that is in disrepair, will undergo extensive redevelopment or requires planning permission to change its use to name a few, in these examples a conventional mortgage may not be available. They are also commonly used for auction purchase where a transaction is needed to meet deadlines.
These types of loans will help you secure your new purchase and are more expensive than conventional finance/ mortgages. With any Bridging loan, you need to have a long-term solution (often referred to as the Exit) on how the bridging loan is to be repaid.