This will depend on your personal financial situation.  If you can afford the repayments on a principal and interest loan, you’ll start paying off the sum you borrow earlier and begin building equity straight away.  These are also cheaper in the long run.  However, if you’re struggling during the expensive construction phase of building your home, an interest-only loan will mean your repayments are lower at a time when you’re having to pay rent and construction costs at the same time.  Use Savvy’s handy interest-only mortgage calculator to work out how much your interest-only repayments may be.