What Is Principal?

Your principal is the amount of money you actually borrowed from your lender, not counting interest, taxes, or insurance. Each monthly payment chips away at this balance, and the portion that goes toward principal grows over time through amortization.

For example, if you take out a $350,000 mortgage at 7% for 30 years, your monthly payment is about $2,329. In the first payment, only roughly $288 reduces the principal while $2,042 covers interest. After 10 years of payments, your remaining principal balance is still about $296,000—meaning you have paid down only $54,000 of the original amount despite paying over $279,000 total. This is why extra principal payments early in the loan can save you substantial interest.

Key Facts

• Starting principal: Equals your home price minus the down payment
• Slow early paydown: On a 30-year loan at 7%, only about 12% of each early payment goes to principal
• Balance after 10 years: Roughly 85% of the original principal still remains on a 30-year loan at 7%
• Extra payments: An additional $200/month in principal on a $350,000 loan at 7% saves over $100,000 in interest
• Principal vs. equity: As principal decreases, your home equity increases dollar for dollar (assuming stable home value)

Frequently Asked Questions

How do I find my current principal balance?

Check your most recent mortgage statement or log in to your lender’s online portal. Your statement shows the unpaid principal balance, which is the amount you still owe excluding interest, fees, and escrow. This number decreases with each payment.

Should I make extra principal payments?

If your loan has no prepayment penalty and you have an emergency fund in place, extra principal payments can save you significant interest over time. Even small additional amounts each month compound in your favor because you reduce the balance that accrues interest.