What is the home loan principal amount?

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The home loan principal amount is the amount of money initially borrowed from the lender, and as the loan is repaid, it can also refer to the amount of money still owed. If you avail a home loan of Rs. 50 lakhs, the principal is Rs. 50 lakhs. If you pay off Rs. 10 lakhs, the principal balance will be Rs. 40 lakh.

Conversely, interest is the amount of money the lender charges on top of the principal amount, and is calculated based on the home loan interest rate and the amount of the principal outstanding.

A home loan is repaid through EMIs and you can use a home loan EMI calculator to know the payable EMI. Each EMI can be broken up into interest and principal components, which change as repayment progresses. Lenders create an amortization schedule, which shows the amount going towards interest and principal repayment each month. In this schedule, the amount going towards paying off the principal gets progressively bigger every year at a faster rate.

Also read: How to calculate home loan EMI?

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Principal Amount FAQs

What is the Formula for Finding the Principal Amount?

As you might already know, the original amount of money that you borrow from a lender is called the Principal amount. This amount is regardless of the interest and tenor. When you borrow a loan from a lender, you borrow the principal amount while you repay the same with an additional amount that depends on the loan tenor and the rate of interest. To calculate the principal amount on loan availed of, you can use the principal amount formula given below:

Principal payment = Monthly payment – Interest payment
Principal balance = Current loan balance – Principal payment