A bridging loan is used to fund the purchase of another property, before your current one is sold. They provide the convenience of giving you time to sell your property for the best price possible, rather than being rushed to accept any offer.
Bridging loans are interest only, as you’re essentially paying two loans until your current property is sold. Some lenders provide the convenience to capitalise interest on the bridging loan. This means you want to sell your property quickly, otherwise each month your interest charges will keep growing.
The convenience does come at a price. Usually bridging loans are short term, for up to 12 months and more expensive than other types of loans. There’s also the risk of not being able to sell your existing property, or receiving offers significantly lower than expected.