Mortgage Glossary
Principal
The original amount you borrowed — not counting interest. When you make payments, part goes toward reducing your principal.
What It Means
When you take out a mortgage, you borrow a specific amount of money to buy your home. That borrowed amount is called the principal. Over time, your monthly payments chip away at the principal — slowly at first, then faster as the loan matures.
In the early years of a mortgage, most of your payment goes toward interest, not principal. That's how amortization works. But every dollar that reduces your principal is real equity you're building in your home.
Real-World Example
"If you borrow $350,000 to buy a home, your starting principal is $350,000. After years of payments, if you've paid it down to $310,000, that $40,000 difference is equity you've built."
Watch Ryan explain this term
Related Terms
Related Insights
How to Read a Loan Estimate: What Every Number Means Before You Sign
A Loan Estimate is a standardized three-page document every lender must provide within three business days of your mortgage application, and knowing how to read each section can save you thousands and help you compare lenders fairly. This guide walks through every key number — from loan terms and projected payments to closing costs, APR, and the five-year comparison — so you know exactly what you're looking at before you sign.
Renting vs. Buying in Utah: How to Know When the Numbers Make Sense
Deciding between renting and buying in Utah comes down to honest math — how long you plan to stay, what you can realistically afford, and what programs may help you get there. This guide breaks down the true costs on both sides and offers a practical checklist for assessing your readiness.
Ask Mia About This
Get personalized answers from your AI guide.
Browse All Terms
Back to the full mortgage glossary.
Work Hard Mortgage · NMLS #2396714 · Equal Housing Opportunity
Definitions are for educational purposes only and do not constitute financial or legal advice.