Principal balance

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. 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 does not require any money to be paid toward the principal balance each month, but such payment is allowable.