A loan’s actual balance, excluding the interest owed for borrowing. This is the original amount borrowed from the lender that needs to be repaid, in addition to all the other costs of borrowing that amount (interest, insurance, and taxes). The principal is paid monthly over the term of the mortgage.

The loan principal is the amount of money owed on that loan. As you make monthly mortgage payments, your principal — in theory — goes down. The amount of interest you pay on a monthly loan will affect how much of your monthly mortgage payment goes to paying down the principal. A high interest rate means you’ll pay less on the principal, meaning you’ll pay more on your loan over time.