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Original Principal Balance

Original Principal Balance

A term commonly used in the mortgage industry. It refers to the initial amount of money borrowed by a borrower before any payments or interest are added to the loan. The original principal balance is crucial because it determines the monthly mortgage payment that the borrower must make. For example, if the original principal balance is $300,000, and the interest rate is 3%, the borrower's monthly payment will be higher than if the original principal balance were $200,000. Over time, as the borrower makes payments on the loan, the principal balance decreases, and interest begins to accrue on the remaining balance. Knowing the original principal balance is also essential for determining the equity in a property. Equity is the difference between the current market value of the property and the outstanding mortgage balance. Therefore, understanding the original principal balance is critical for borrowers and lenders alike.
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