After 5 years, how much principal has been paid on a $200,000 loan if the original balance is now $188,000?

Explanation

Principal paid = Original Balance - Current Balance = $200,000 - $188,000 = $12,000. In the early years of an amortized mortgage, most of each payment goes toward interest. Only $12,000 of principal was reduced in 5 years on a $200,000 mortgage—demonstrating how slowly equity builds early in a mortgage.