When you apply for a home loan, you will be asked what repayment type you want - Principal and Interest (P&I) or interest only.
There are two ways you can repay your home loan - Principal and interest OR interest only.
When you decide to pay P&I, you could be shredding your home loan faster, depending on the lender and loan type you could be able to redraw surplus funds and you typically will have a lower interest rate than an interest only loan.
However, your loan repayments for P&I loans will be higher than interest only loans and if you have an investment property you might have fewer tax benefits.
With interest only loans you most likely will have lower repayments, better tax benefits for investment purpose and it could assist you in planning your budget better during the interest only period.
However, once your interest only period is over, typically it is for maximum of five years, your repayments will go up as you will then need to pay principal as well. While you are in the interest only period, you are not paying anything towards the principal.
As you can see, P&I loan or interest only loan can be suitable depending on what your financial situation is and what your goals are. It is important to apply for the repayment type that is suitable to you.
If you are unable to decide what repayment type will be suitable to you, we are more than happy to help you.