So, coming back into the PowerPoint, what it's always helpful to look at

when accounting for a mortgage is what's called an amortization schedule,

which tracks the principal and interest payments over time.

So at the end of that first year, December 31,

2010, the amount of principal that we owe is $10,000.

Then we're going to make a payment on that day of 3,672.

Now, that payment is going towards principal and interest.

So first, you calculate the interest portion of the payment.

You take the beginning balance, which is 10,000, times the 5% annual interest rate.

And so, we're owe in terms of interest for the first year is $500.

So, how much principal are we paying?

It's the difference between 3,672 and

500 of interest, which means we're paying 3,172 of principal.

So if we're paying that much principal, that means that after the payment,

the ending balance in our principal, our mortgage payable,

will be 6,828, which is 10,000 minus 3,172.