# Principal

Definition

- In mortgage terms, principal is the original balance of loaned money on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.

**Synonyms**

principal amount, principal sum, mortgage principal, loan principal, principal value

## Related Terms and Acronyms

- Add-on Interest — Definition,
- Interest that is computed at the beginning of the loan, then added to the principal, so that all must be repaid, even if the loan is paid off early.

- Additional Principal Payment — Definition,
- Extra money included with a loan payment to pay off the amount owed faster. Over time, this practice reduces the amount of interest paid.

- Amortization Table — Definition,
- A mathematical formula used to calculate monthly mortgage payments based on the borrowed loan amount, the interest rate, and the loan term.

- Amortized Loan — Definition,
- A loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal.

- Amount Financed — Definition,
- The principal that is financed. It could include the cost of the purchase and other items rolled into the payments.

- Annual Mortgage Statement — Definition,
**Important**,- A report sent to the borrower every year, detailing how much principal remains on the home loan and how much was paid in taxes and interest during the previous year.

- Balloon Loan — Definition,
- A loan in which the payments aren't set up to repay the loan in full by the end of the term. At the end comes the balloon payment -- one that is larger than the other, periodic payments and pays off the remaining principal.

- High-ratio Mortgage — Definition,
**Important**,- A mortgage in which a borrower places a down payment of less than 20% of the purchase price.

- Interest (int, IN) — Acronym & Abbreviation,
- Money paid for the use of borrowed funds, usually expressed as an annual percentage.

➥ Bank account transaction code. - Interest Adjustment Date — Definition,
- The date one month prior to the beginning of amortization when accrued interest computed on the monies advanced becomes due.

- Interest Only Payments — Definition,
- A payment plan where only the interest is paid off.

- Interest Rate (IR) — Acronym,
**Very Important**,- The rate a lender charges an individual to borrow money.

- Lending Value — Definition,
- The property value for mortgage purposes. Usually the lesser of appraised value or sale price.

- Loan — Definition,
- Letting another party use something of value temporarily.

- Loan Origination — Definition,
- The process of applying for a loan and the handling of that application by a lender.

- Loan-to-Value (LTV) — Acronym,
**Very Important**,- The ratio of the principal amount of the loan to the lesser of the purchase price of the property or the property's appraised value. This can be expressed as an 80% loan, or 80% LTV.

➥ A widely used term in the mortgage brokerage and lending industry, especially by mortgage underwriters. - Mortgage (mtg) — Abbreviation,
**Important**,- A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.

- Original Principal Balance — Definition,
- The amount borrowed.

- Pre-computed Loan — Definition,
- With a pre-computed loan, the interest owed over the life of the loan is calculated using a standard amortization table. After signing for this type of vehicle loan, the borrower is obligated to pay back principal plus the full amount of interest that will accrue over the entire term of the loan.

- Principal and Interest (PI, P&I) — Acronym,
- Acronym for the elements of a mortgage payment: principal and interest.

- Principal, Interest and Taxes (PIT) — Acronym,
**Important**,- Principal, interest and taxes. The components of a monthly mortgage payment.

- Principal, Interest, Taxes, and Insurance (PITI) — Acronym,
- Acronym for the elements of a mortgage payment: principal, interest, taxes and insurance.

- Provision for Credit Losses (PCL) — Acronym, Canada,
- The amount deducted from income equal to the amount by which a bank adjusts its loan balances to reflect anticipated losses on them.
- A margin set by companies to compensate for losses due to unpaid credit.

- Purchase Price — Definition,
- The total selling price of the home, including the cash down payment and the principal on the loan.

- Reconveyance — Definition,
- The transfer of title to the borrower after a mortgage has been paid fully.

- Remaining Balance — Definition,
- Unpaid principal on a loan.

- Remaining Term — Definition,
- The time it will take to pay off the rest of an instalment loan as scheduled.

- Rests — Definition,
- The periodical balancing of an account for the purpose of converting interest into principal, and charging the party liable thereon with compound interest.

- Simple Interest (SI) — Acronym,
**Important**,- Interest computed only on the principal balance, without compounding.

- Simple Interest Loan — Definition,
- A method of allocating the monthly payment between interest and principal. The interest charged is determined by the unpaid principal balance on the loan, the interest rate, and the number of days since the last payment. The rest of the payment goes to the principal. Making early payments or additional payments reduces the loan's principal and cuts the total interest paid over the life of the loan.

- Step-rate Mortgage — Definition,
**Important**,- A fixed-rate home loan on which payments are lower at the beginning, typically for two years, and which then rise.

- Term — Definition,
- The length of time you commit to repay a lender or bank at an agreed upon interest rate and payment schedule. The interest rate usually remains constant during this term unless the commitment states otherwise. For example, a five year fixed rate mortgage has a term of five years.