Definition
The original amount of money borrowed for a mortgage, not including interest. As you make monthly payments, a portion goes toward reducing the principal balance. In the early years of a mortgage, most of each payment goes to interest. Making extra principal payments can significantly reduce the total interest paid and shorten the loan term.
Related Mortgage Terms
- Amortization
The process of paying off a mortgage through regular monthly payments of princip...
- Equity
The difference between your home's current market value and the remaining mortga...
- Interest Rate
The cost of borrowing money, expressed as a percentage of the loan amount charge...
- Annual Percentage Rate (APR)
The total annual cost of a mortgage expressed as a percentage, including the int...
- Appraisal
A professional assessment of a property's market value conducted by a licensed a...
Understanding mortgage terminology helps you compare loan offers and make informed decisions. Use our mortgage calculator to see how these terms affect your monthly payment.