Principal is the original amount borrowed in a mortgage loan, excluding interest and other costs.
In the context of a mortgage, the principal refers to the original amount borrowed, which includes the initial loan amount and does not exclude interest and other costs.
When you take out a mortgage loan to purchase a property, the principal is the total amount of money you borrow from the lender. This amount forms the basis for calculating the interest that accrues over the life of the loan. The interest is a percentage of the outstanding principal balance that the borrower pays to the lender as part of the loan agreement.
In addition to the principal and interest, a mortgage loan may also include other costs such as origination fees, closing costs, and mortgage insurance premiums. These expenses are typically rolled into the loan amount and increase the total principal balance.
Over time, as you make regular mortgage payments, a portion of the payment goes towards reducing the principal balance, while another portion goes towards paying the interest. Gradually, the principal decreases, and the interest payments decrease accordingly.
