How to set up a home purchase (asset) with mortgage
Usually, this is intuitive, but still a bit stumped, because there are a couple of hitches from a straight loan.
I purchase a home for $200K with $50K down payment, and $150 Mortgage. I create an asset "HOME" and a subasset of "01 Equity" in which when I write the check to the seller, gets the category of "01 Equity" so now "HOME" has an asset value of $50K. I then create a category of "HOME Interest" as an expense and when I created the mortgage account, send the interest into it. The value of the mortgage creates a liability of $150K (per net worth report).
I could create another subasset of "02-Mortgage" and give it an initial value of $150K. That would have the effect of showing that the mortgage was "re-invested" for the point in time that I did it. And that would show up properly on the net worth.
But as the mortgage is amortized over the 30 years, each month pays part of the principal:
(1) Will the mortgage balance decrease as each month contributes to the principal?
(2) if so, does that decrease reflect in the Net Worth (increase as expense is capitalized)?
(3) My accounting background would say that I would increase the amount in "01 Equity" and decrease the amount in "02 Mortgage" but I do not see any automatic way of doing this. Or is there?
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System closed this discussion on 14 Apr, 2018 06:20 PM.