What is a Mortgage Principal?

What is a Mortgage Article

At some point in life, you will be in the market to buy a house. When it comes to buying a house, many get a mortgage. A mortgage allows borrowers of all backgrounds and situations to become homeowners. Payments that go towards the loan, interest, taxes, and insurances all tend to be in the mortgage statement.

A key component of the monthly mortgage statement is the principal. In the context of borrowing, principal is the initial size of a loan and the amount that must be repaid. Your loan principal is the total amount that you originally borrow when you get a mortgage. The more you borrow, the more you have to pay back, for a loan of a given size. The size of your loan determines the principal amount. A larger loan, such as 30-years, can have lower monthly payments while a shorter loan size, such as 15-year, can have higher monthly payments. Depending on the housing loan, whether it be fixed-rate loans or adjustable-rate loans, your monthly statement may change.

Borrowers pay more towards interest at the beginning of their set loan term and pay more towards their principal towards the end. The more you pay towards your principal, the more equity and ownership you gain.

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