What is mortgage principal & interest?

Mortgage principal and interest are the two key parts of your monthly mortgage payment when you borrow money to buy a home. Your principal payment is what gets you out of debt. Your interest payment is what makes borrowing the money possible. Here’s a detailed breakdown of how mortgage interest and principal work and how they’re calculated.

How do I calculate principal vs interest?

Next, how to find the principal: Once you know your monthly payment, you can use the following formula to calculate how much of that amount will go toward principal vs. interest. Principal Payment = Monthly P&I Payment - (Loan Balance x Interest Rate) Notice how one of the variables is loan balance.

What is a principal payment on a mortgage?

Principal Payment Explained When you make a payment on a mortgage you’re putting money towards two main components: principal and interest. The mortgage principal is the original amount of money you borrow for your home, while interest is a percentage of the principal balance that you pay to the lender for borrowing the money.