A bridging loan is known as short-term finance, and is used as such. Often, buyers use it to "bridge the gap" between selling their house and buying a new one. It can and had now been used in more innovative ways, such as, to purchase land and develop on it. The finance usually lasts 3-18 months and the interest is in three types (serviced, rolled up, retained). The term depends on whether you're using the bridging loan for a personal build or to develop houses, and sell them on.
Serviced: The monthly payments are made much like you would for a mortgage.
Rolled up: The interest is "rolled up" month to month including all fees and paid at the end of the term. The interest is effectively added to the loan and paid in one.
Retained: The interest is added together than taken at the end of the term. This can be more costly though as the interest is compounded over the term and paid in a lump sum.
Bridging finance is often used for development projects on BTL properties and commercial portfolios.
Rates are calculated monthly as I stressed earlier, and they also allow you to pay it all off at once.
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