1. What Is Principal Payment?

The principal payment is the portion of your mortgage payment that goes toward reducing the original loan amount, separate from the interest portion that goes to the lender.

2. How Does The Calculator Work?

The calculator uses the simple formula:

Where:

• \( Payment \) — Total monthly mortgage payment amount
• \( Interest \) — Interest portion of the payment

Explanation: This calculation helps you understand how much of your payment is actually reducing your loan balance versus paying interest costs.

3. Importance Of Principal Calculation

Details: Tracking principal payments helps homeowners understand their equity growth, plan for early payoff, and make informed decisions about additional payments.

4. Using The Calculator

Tips: Enter your total monthly payment amount and the interest portion. Both values must be positive numbers, and the payment must be greater than or equal to the interest amount.

5. Frequently Asked Questions (FAQ)

Q1: Why does the principal portion change over time?
A: In amortizing loans, the interest portion decreases over time while the principal portion increases, even though the total payment remains constant.

Q2: How can I increase my principal payments?
A: You can make additional principal payments, which will reduce your loan balance faster and save on total interest paid.

Q3: What's the difference between principal and interest?
A: Principal is the original loan amount you borrowed, while interest is the cost charged by the lender for borrowing that money.

Q4: Does making extra principal payments help?
A: Yes, extra principal payments reduce your loan balance faster, shorten your loan term, and save you money on total interest paid.

Q5: How is the interest portion calculated?
A: The interest portion is typically calculated as the remaining loan balance multiplied by your monthly interest rate.