The principal balance, in regard to a mortgage or other debt instrument, is the amount due and owing to satisfy the payoff of the underlying obligation, less interest or other charges.
Amortized mortgage loans automatically pay a portion of each monthly payment to the principal balance, with the rest being paid as interest.
An interest-only loan doesn't require any money to be paid toward the principal balance each month, but such payment is allowable.[1]
See also
- Unpaid principal balance
References