Principal & Interest
Principal & Interest (P&I) loan repayment method covers the repayments of both Principal(Original Loan Borrowed) as well as the interest accrued.
Pros:
- You build equity
- You pay off the loan
Cons:
- Repayment is higher
P&I May not be suitable for short term investors/developers
Interest Only
As the name suggests, Interest Only (IO) repayment method is the payment of the interest of the loan only, for a set period of time usually 1-5 years and the loan will be switched to P&I after the IO term. Different lenders have different IO periods available.
Pros:
- Lower minimum repayment,
May be best suited for investors/developers
Cons:
- Principal remains unpaid