How to set up a home purchase (asset) with mortgage

sprimost's Avatar

sprimost

13 Jan, 2018 06:17 PM

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?

Thanks

Reply to this discussion

Internal reply

Formatting help / Preview (switch to plain text) No formatting (switch to Markdown)

Attaching KB article:

»

Attached Files

You can attach files up to 10MB

If you don't have an account yet, we need to confirm you're human and not a machine trying to post spam.

Keyboard shortcuts

Generic

? Show this help
ESC Blurs the current field

Comment Form

r Focus the comment reply box
^ + ↩ Submit the comment

You can use Command ⌘ instead of Control ^ on Mac