Quick answer
Principal is the amount you borrow on a mortgage and have to pay back, not counting interest. The part of each payment that reduces the loan balance is the principal portion; the rest pays interest on the balance you still owe.
Key facts
$360,600
US median home value (used in the example)
US Census Bureau, American Community Survey 2024 1-year · 2024 ACS 1-year
7.24%
30-year fixed average (used in the example)
Freddie Mac Primary Mortgage Market Survey · Week of Oct 29, 2026
Starting principal vs the price
Your starting principal is the purchase price minus your down payment, plus any fee you choose to finance, such as FHA’s upfront mortgage insurance premium or the VA funding fee. Lenders compare it with the home’s value to get your loan-to-value ratio.
Example
On a $361,000 home with 10% down, the principal is $324,900. At 7.24% over 30 years, the first five years of payments include only $18,295 of principal against $114,556 of interest, leaving a balance of $306,605. That slow start is how amortization works on a long loan.
Paying extra principal
Any amount you send beyond the scheduled payment, marked for principal, lowers the balance at once, so every later payment carries less interest and the loan ends sooner. Check first that the loan has no prepayment penalty. To lower the monthly payment instead of the payoff date, ask the servicer about a recast. The extra payment calculator shows the interest saved.
Sources
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- US Census Bureau, American Community Survey 2024 1-year — Median value of owner-occupied homes (2024 ACS 1-year)
- CFPB: What’s the difference between my principal and interest payment and my total monthly payment?
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.