Which term describes the initial amount of the loan taken out to purchase a property?

The term that describes the initial amount of the loan taken out to purchase a property is "Principal." In the context of real estate financing, the principal is the original sum of money borrowed from a lender to buy a home or property. This amount is essential because it forms the basis on which interest is calculated over the life of the loan.

Understanding the principal amount is crucial for borrowers, as it directly impacts monthly payments, the total interest paid over the term of the loan, and the overall financial obligation. For example, if a borrower takes out a $200,000 loan to buy a house, $200,000 is the principal.

The other terms, while related to financing, refer to different aspects. Equity represents the homeowner's interest in the property, which is calculated as the property’s value minus any outstanding loan balances. Amortization refers to the process of gradually paying off the loan through regular monthly payments over time. Finally, the down payment is the initial cash amount paid upfront by the buyer toward the purchase of the property, often expressed as a percentage of the property's purchase price, but it is not the loan amount itself.