Definition
The original amount borrowed, not including interest or fees. Each monthly payment is applied first to accrued interest, then to reducing the outstanding principal. As your principal decreases, so does the interest portion of each payment.
Related Rates & Terms Terms
The process of paying off a loan through regular monthly payments over time. Early in an amortizing loan, most of the payment covers interest. As the loan matures, more goes toward principal. A 30-year mortgage is fully amortized over 360 payments.
A financing arrangement where points or seller concessions are used to reduce the mortgage rate. A temporary buydown (like 3-2-1) lowers the rate for the first few years; a permanent buydown reduces it for the loan's full term.
A limit on how much an ARM's rate can change at each adjustment period or over the loan's lifetime. A common structure is 2/2/5, meaning 2% max at the first adjustment, 2% at each subsequent adjustment, and 5% over the life of the loan.
The maximum loan amount eligible for purchase by Fannie Mae and Freddie Mac. For 2026, the baseline conforming limit is $806,500. Loans above this threshold are jumbo loans and follow different underwriting guidelines.
Have a Mortgage Question?
Dan Ardis has 20+ years of experience and answers questions like this every day. Give him a call.