What is Principal?
The principal is the original amount of money borrowed on a mortgage, separate from interest and other costs, and it decreases as you make payments over time.
Principal is the amount of money you borrow from a lender, not including interest or fees. When you take out a mortgage, the principal is the loan amount used to buy the home or refinance an existing loan. Each monthly payment is split between principal and interest; early payments go mostly toward interest, while later payments reduce principal faster. Making extra principal payments can shorten your loan term and reduce total interest. Watch for prepayment penalties or fees that might apply if you pay extra. Also, ensure your servicer applies extra payments to principal, not to future payments, unless you specify otherwise.
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