Principal
The part of your loan balance that's actual borrowed money, not interest. Every payment splits between principal and interest, with more going to principal over time.
Every term like this one lights up in the step you're on.
Free to set up. No credit card.Part 1 of 4
Why a seller cares
Principal is what you actually still owe, and the principal balance is the heart of your payoff. Every payment moved a little of it; the rest was interest, taxes and insurance.
Part 2 of 4
A simple example
You borrowed $240,000 eight years ago at 6%. Your principal balance is about $211,000, and that is what your payoff is built on.
| The number | What it is |
|---|---|
| Original loan, $240,000 | The principal you started with |
| Balance today, about $211,000 | The principal left; your payoff starts here |
| Payoff at closing | That balance plus interest to the day and any fees |
Principal is the debt. Everything else on the payoff letter is the cost of having had it.
Part 3 of 4
What people get wrong
That eight years of payments cut the debt by eight years' worth. Most of the early payments were interest, so the principal moved slowly.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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In your room, this word explains itself where it appears.
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