Real Estate Term
Principal
The amount of money borrowed in a mortgage, excluding interest.
What is Principal?
Principal is the amount of money you originally borrow for a mortgage, separate from the interest charged to borrow it. Each mortgage payment is split between interest and principal, and over time a larger share goes toward reducing the principal, which builds your equity. Making extra or lump-sum payments toward principal shortens the loan and lowers total interest.
Frequently asked questions
Related terms
AmortizationThe process of paying off a loan over time through regular payments that cover both principal and interest.Interest RateThe percentage charged by a lender for borrowing money, typically expressed as an annual rate.EquityThe difference between a property's market value and the amount owed on the mortgage.MortgageA loan used to purchase real estate, with the property serving as collateral.
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