Easy Financial Calculators » Mortgage Terms » Principal


Principal is the amount of the mortgage loan that is currently owed or outstanding. As you make monthly payments, a portion of your payment is applied to the principal balance and the other portion is interest paid to the lender. For a traditional fixed mortgage the initial payments you make have a larger percentage applied to interest. For this reason, the beginning months or years principal balance of your mortgage goes down very slowly, as a majority of your payment is applied as interest. To speed this process up, consider a shorter length in years or consider making extra payments or bi-weekly mortgage payments.

Principal balance of loan example:

Principal balance reduced as payments made

Learn more helpful Mortgage Terms to assist your home buying process.

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