Principal Recapture Explained
Principal recapture is a financial concept used to describe the sum of all the principal payments on your mortgage for the year. It’s also referred to as debt payed down or debt reduction. With most traditional mortgages, the amount that goes toward the principal versus interest will change with each mortgage payment. Learn more below.
If you’ve ever looked at how mortgage payments are structured, you’ll know they can be complex. This is because most mortgages are amortized to pay off the debt over a period of years. To make mortgages even more complicated, how the amortization is calculated varies depending on the mortgage product you choose and which country you are in Typically, your principal recapture will be the lowest in year one of ownership and it will gradually increase over time.
How Principal Recapture Works
To determine your principal recapture, you will first need to find and review your amortization schedule. An amortization schedule is a graph or document which lists each mortgage payment and outlines how much of each payment goes toward interest and principal. Your schedule may be a table and/or a graph.
So how do we calculate it?
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