Principal

Rates and thresholds change. The current figures are kept in one place: the Singapore property rules reference.

What it is

When people talk about how much they borrowed for their property, they usually mean the principal. It is the loan amount itself, separate from interest, and separate from the property price, since the price also includes your down payment and other costs the loan does not cover. If you borrow 800,000 dollars, that 800,000 dollars is your starting principal.

How it works

Every monthly instalment you pay is split into two parts, interest for that period, calculated on the principal you still owe, and a portion that goes toward reducing that principal. In the early years of a long tenure, most of each instalment goes toward interest, because the outstanding principal is still large. As the years pass and the principal shrinks, a bigger share of each instalment goes toward paying it down. This gradual shift in the split is what a mortgage schedule is built around.

Your outstanding principal at any point is what you would need to settle in full if you sold the property, refinanced with another bank, or wanted to close the loan early, sometimes with a redemption fee attached during a lock in period.

A simple worked illustration

On an illustrative loan of 800,000 dollars at 1.5 percent per year over 25 years, the first monthly instalment of roughly 3,200 dollars might include around 1,000 dollars of interest and 2,200 dollars of principal paydown. Ten years in, with the outstanding principal much lower, a similar instalment might include closer to 600 dollars of interest and 2,600 dollars of principal. These are rounded, made up figures to illustrate the shift, not an exact schedule for any real loan.

What first time buyers get wrong

• Confusing the principal with the property price, when the principal only reflects what the bank actually lent.
• Assuming a longer tenure only changes the monthly amount, without realising it also slows down how quickly the principal reduces and increases total interest paid over the life of the loan.
• Not tracking the outstanding principal over time, which matters if you plan to sell, refinance, or make an early repayment later.

What to check

Ask your bank for the current outstanding principal whenever you review your mortgage, rather than assuming it has fallen in line with how many years have passed. If you are comparing loan tenures, look at how the total interest paid over the full period changes as tenure changes, not only the monthly instalment. Confirm the exact figures for your loan with your bank rather than relying on general examples like the ones on this page.

Winfred Quek is an Associate Marketing Consultant at Crestbrick Pte Ltd (CEA Licence No. L31010886H). CEA R073319H. This page is for general information only and does not constitute financial, investment, or legal advice. Verify current figures with IRAS, HDB, CPF Board, or MAS before making any decision.