A permanent loan finances a stabilised property: leased up, with steady income. Terms are long (often 5 to 10 years, sometimes more), the rate is usually fixed, payments amortise over something like 25 to 30 years, and the pricing is the cheapest the property can get. Sizing uses today's NOI.
Because the lender has priced a fixed rate for years, paying off early usually costs something: a prepayment penalty that steps down over time (5%, 4%, 3%…), yield maintenance (a payment that makes up the lender's lost interest), or defeasance (replacing the property as security with bonds that pay the remaining payments). Exact terms vary by loan.
A bridge loan finances a property in transition: half-empty after a big tenant left, being renovated, or bought quickly before permanent financing can be arranged. Terms are short (often 1 to 3 years, with options to extend), the rate is usually floating (a benchmark plus a margin) and higher, payments are often interest only, and fees are higher. Prepaying is usually cheap, because the plan is to pay it off early.
Bridge lenders size on the business plan as well as today's numbers: the in-place NOI may not cover the payments at all, so the loan often includes reserves (money set aside for interest, renovations and leasing costs) and is tested on the stabilised NOI the plan expects. The risk is that the plan runs late or the market turns, so lenders look hard at the sponsor's track record and keep the leverage modest.
The usual path: buy or reposition with a bridge loan, execute the plan, then refinance into a permanent loan sized on the new, higher NOI. That refinance is the bridge lender's exit, so it's underwritten from day one: will the stabilised NOI support a permanent loan big enough to repay the bridge?