Remaining Balance
Definition and meaning of Remaining Balance in real estate.
The remaining balance is the unpaid portion of a mortgage loan's principal amount, excluding future interest, that a borrower still owes to the lender.
In more detail
Each monthly mortgage payment is split between paying off the interest accrued for that month and reducing the principal balance. In the early years of a long-term amortized loan, the majority of the payment goes toward interest, meaning the remaining balance decreases slowly. Over time, a larger portion of each payment goes toward the principal, accelerating the rate at which the balance declines.
Knowing this figure is essential when calculating home equity, determining how much cash a seller will walk away with, or planning to pay off the mortgage early.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Excludes | Unaccrued future interest |
| Used to calculate | Home equity |
| Decreases | With each monthly principal payment |
After making monthly payments on his home loan for ten years, the homeowner checked his statement and saw his remaining balance had decreased significantly.
Frequently asked questions
Is the remaining balance the same as the payoff amount?
No, the payoff amount is slightly higher than the remaining balance because it includes the interest that accumulates between your last payment and the date the loan is fully paid off.
How does making extra payments affect the remaining balance?
Making extra payments directed toward the principal directly reduces the remaining balance, which lowers the total interest you will pay and shortens the loan term.