Principal repayment (úmor)
The part of the regular payment that reduces the debt, i.e. the principal. The rest of the payment is interest on the current balance. With an annuity, principal repayment is small at first and grows as the debt shrinks, because interest is charged on an ever smaller sum while the payment stays the same. An extra repayment goes entirely towards principal.
Example
A CZK 4,000,000 mortgage over 25 years at 5.00 % has a payment of CZK 23,384. In the first month CZK 6,717 goes to principal and CZK 16,667 to interest. Principal overtakes interest only in month 135, after 11 years and 3 months. Over the first 5 years you repay only about CZK 457,000 of principal, against roughly CZK 946,000 in interest.
In practice
Anyone planning to sell or refinance after a few years will have repaid less than they expect. You will find the remaining debt in the repayment schedule or in internet banking. A longer term shrinks principal repayment in the early years even further. Do not estimate the balance from the number of payments made: five years into twenty-five, you have repaid not a fifth of the debt but roughly a ninth.
How it differs
The principal is the debt still to be repaid; principal repayment is the amount by which one payment reduces it. An annuity is the whole constant payment, made up of principal and interest. With constant-principal repayment, which banks offer only rarely, it is the principal repayment that stays fixed, and the total payment gradually falls.
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