The 3 fields and concepts you'll meet in the response — defined in plain English, each with a real example value.
The process of paying off a loan through regular payments that include both principal and interest.
In an amortizing loan, early payments are mostly interest while later payments are mostly principal. An amortization schedule shows this breakdown for each payment over the loan term.
ExampleMonth 1: $500 principal, $1000 interest; Month 360: $1400 principal, $100 interest
The original loan amount borrowed, excluding interest.
Principal decreases with each payment. The principal portion of your monthly payment goes directly toward reducing your loan balance. Paying extra principal accelerates payoff.
ExampleLoan amount: $300,000 principal
A portion of your monthly payment held by the lender to pay property taxes and insurance.
Lenders collect 1/12 of annual tax and insurance costs each month. When these bills come due, the lender pays them from your escrow account. This ensures these critical payments are never missed.
Examplemonthly_payment.property_tax: 166.67 (escrow)
