If you choose to make principal and interest repayments, you’re paying down both the loan amount (the principal) and the interest. Interest only repayments only pay down the interest, for a set period of time - usually one to five years.
You typically get a lower interest rate when you make principal and interest repayments, and because you’re reducing your loan amount each month, you could pay less interest over the life of your loan.
No matter which repayment option you choose, the length of your loan remains the same. With an interest only loan, you’ll still have the full loan amount to pay off when the interest only period ends, but in less time.
Equity is the difference between the market value of your home and what you owe on your loan. Your equity grows as you pay off your loan amount (even more so if the value of your property goes up) - you could use it to fund renovations or an investment property.