Principal Balance
The outstanding balance of principal on a mortgage
not including interest or any other charges.
The outstanding amount of the loan, on which the lender charges interest. As the loan is repaid, a portion of each
payment is used to satisfy current accrued interest; the remainder of the payment is used to reduce the outstanding
principal balance.
Example:
The initial payment for a 100,000 house was at 20,000. The principal is set at 80,000. After five years, the borrower
has paid off 15,000 in principal but the house is now worth 110,000. the principal is not affected by this rise in value
and will remain at 65,000.
