Outstanding principal
The share of the borrowed capital still to be repaid at a given moment, excluding future interest. It falls with each installment of an amortizing loan and is the basis for computing interest, early-repayment penalties and the cost of a buy-back. It is the key figure when deciding on a renegotiation.
Key points
- Exact amount of the loan still to be repaid at a given date, excluding future interest.
- Basis for calculating early-repayment penalties, which are capped by regulation.
- Decreases progressively with each installment in a standard amortizing loan.
- Key figure for assessing the economic value of a buy-back or renegotiation.
Frequently asked questions
How does the outstanding principal evolve over time?
In a fixed-installment loan, the share of capital repaid at each payment is small at the start and grows progressively as the interest share decreases. In practice, a borrower who has repaid half of the term has not necessarily repaid half of the capital.
Why is outstanding principal central to a buy-back decision?
Early-repayment penalties are calculated on this amount, as is the new buy-back loan. The higher the outstanding principal, the greater the potential gain from a rate reduction, and the more exit costs weigh. The broker models both to verify the operation's profitability.
What is the difference between outstanding principal and amortized capital?
Amortized capital represents what has already been repaid since the loan was drawn down; outstanding principal is its complement up to the original borrowed amount. Together they always equal the original principal. The amortization schedule provided by the bank details this breakdown payment by payment.
In practice
A client borrowed €200,000 over 20 years; after 8 years of repayments, their outstanding principal stands at around €140,000. It is on this basis that the broker calculates the early-repayment penalties and compares them with the savings achievable at the new target rate.
Official sources
- The annual percentage rate (APRC) · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr