Principal (jistina)
Jistina in English is the principal: the amount you borrowed and still owe, without interest. At the start it equals the loan amount, and each payment reduces it by the principal repayment. The bank always charges interest on the current outstanding principal, so a koruna repaid earlier saves interest for the whole remaining term. An extra repayment goes entirely towards principal.
Example
Take a CZK 4,000,000 mortgage over 25 years at 5.00 %. After 5 years the outstanding principal is roughly CZK 3,543,000: you have repaid only CZK 457,000, against CZK 946,000 in interest. An extra repayment of CZK 300,000 at that point, used to shorten the term, saves about CZK 460,000 in interest and ends the loan 2 years and 8 months sooner.
In practice
Up to 25 % of the original loan amount a year, not of the current outstanding principal, can be repaid without a fee, in the month before the contract anniversary. On a CZK 4,000,000 loan that is up to CZK 1,000,000 a year. You will find the outstanding principal in internet banking or on the annual statement. When you refinance, the new bank pays it off to the original one.
How it differs
Principal repayment is the part of each payment that reduces the principal; the principal itself is the remaining debt. The interest rate is applied to the outstanding principal and sets how much you pay each month for the borrowed money. An extra repayment cuts the principal in one go, outside the regular schedule, and the bank then recalculates the payment or the term.
Frequently asked questions
What is jistina (principal) on a mortgage?
The part of the debt you still owe, without interest. On a CZK 4,000,000 mortgage it starts at CZK 4,000,000 and falls by the principal share of each payment.
How fast does the principal fall?
Slowly at first. On CZK 4,000,000 over 25 years at 5.00 % you repay only about CZK 457,000 of principal in the first 5 years, against CZK 946,000 of interest, which leaves about CZK 3,543,000.
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