Principal

Mortgage Payment Calculator / « Mortgage Glossary / Principal

Principal is the amount of money you actually borrow on a mortgage and the balance you still owe, separate from the interest charged to lend it to you.

If you buy a $300,000 home with $60,000 down, your starting principal is $240,000. Each monthly payment is split between principal and interest. Early in the loan, most of the payment goes toward interest and only a little reduces the principal. Over time that ratio flips, so later payments chip away at the balance much faster.

Paying extra toward principal shrinks the balance ahead of schedule, which reduces the total interest you pay and can shorten the loan. You can see this split for your own loan with the main payment calculator.

Related terms: Amortization, Down Payment