Principal
The amount you borrow, separate from interest. Each payment reduces principal a little more as the loan amortizes.
What does principal mean?
Principal is the sum you actually borrowed, distinct from the interest charged to borrow it. Every mortgage payment splits between the two, and as the loan amortizes a steadily larger share goes to principal — which is why extra payments, applied straight to principal, shorten the loan and cut total interest so effectively. Your remaining principal is the payoff balance.
Frequently asked
How do extra principal payments work?
Any amount you pay above your scheduled payment, applied to principal, immediately lowers the balance interest is charged on. That cuts total interest and shortens the loan — often by years — without changing your required monthly payment.
What is the difference between principal and interest?
Principal is the money you actually borrowed; interest is the fee charged to borrow it. Each payment covers the interest due first, and whatever remains reduces the principal — a split that shifts toward principal as the loan amortizes.
Put it to use
Amortization Calculator
Generate a complete amortization schedule for any fixed-rate loan, every payment split into principal and interest.
Mortgage Calculator
Estimate your monthly principal-and-interest payment and see a full amortization schedule for any home loan.
Mortgage Calculator with Taxes & Insurance
See your full PITI payment: principal, interest, property tax, homeowners insurance, PMI and HOA dues.
Related terms
All glossary terms