When you take out a $400,000 mortgage, that's your starting principal. Each month, part of your payment goes to interest (the cost of borrowing) and the rest reduces principal.

Early in the loan, most of your payment goes to interest because the balance is high. Over time, the proportion shifts and more goes to principal.

Extra principal payments shorten the loan and save substantial interest — even small amounts ($50-100/month) can shave years off a 30-year mortgage.