2008-10-23 GnuCash IRC logs
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20:31:16 <condeh> Hi all.I have a question regarding entering a mortgage for a house. House value is 92000, mortgage total to pay is 180,000. how do i enter this?
20:35:10 <ben_goodger> open an asset account named "house" and put a debit value of 92000 in it, with the double entry coming from "opening balances", then open a liability account named "mortgage" and put a credit value of 180000 in it, with the double entry also coming from "opening balances"
20:35:14 *** warlord-afk is now known as warlord
20:35:16 <ben_goodger> when you make a payment, debit the mortgage account and credit the bank account
20:35:26 <ben_goodger> ...however, warlord is now coming to correct me
20:35:29 <warlord> condeh: what's the current principal on the mortgage?
20:35:53 <warlord> If your total principal is 180k but the house is only worth 92k I'd walk away!
20:36:36 <condeh> hmm, perhaps i did not explain correctly.
20:36:37 <ben_goodger> indeed...
20:37:04 <condeh> The 180+ is referring to the total amount paid to the bank by the end of the mortgage agreement.
20:37:14 <warlord> condeh: that 180k number is irrelevant.
20:37:21 <warlord> What matters is the principal.
20:37:22 <condeh> the 92+ is(was) the value of the house on purchase.
20:37:29 <condeh> ah, thats my problem then :)
20:37:48 <ben_goodger> night
20:37:53 <warlord> night ben
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20:38:11 <condeh> by principal I assume you mean the actual amount borrowed at the beginning of the agreement?
20:38:27 <warlord> That's the starting principal, yes.
20:38:36 <condeh> ok, its 82879
20:39:01 <warlord> So generally a house purchase is a split txn where you credit your mortgage and cash accounts and debit your assets:house account.
20:39:40 <condeh> ok,i seem to have it a bit opposite.
20:40:16 <warlord> Then as you pay the mortgage you credit cash and debit the mortgage principal (liability) and interest (expense)
20:41:14 <condeh> hmm ok, let me see
20:44:42 <condeh> I think I have it now, assets:house is showing 82879, Loans:mortgage is -81305 (I have 1.5 yrs paid already), and Expenses:Interest:Mortgage is showing 6k+
20:45:33 <condeh> This is how i had it originally, just thought it was not right as it was not showing the total amount i would have to pay, and was also showing assets:house as if it were fully paid
20:45:40 <warlord> Well, you probably also want to add the down payment costs to assets:house.. But perhaps that should come from Equity:Opening Balance
20:46:25 <warlord> It shouldn't show the amount you would have to pay, because there's nothing that says you'll actually pay that much. You COULD prepay.. or refinance.. or...
20:46:38 <condeh> yes, i see, thats true.
20:47:01 <warlord> generally 'accounting' is only about what you did, not what you might do.
20:47:11 <warlord> (the latter is more "budgeting")
20:50:03 <condeh> cool, I think i've got it a bit more figured out. Thanks a lot for your help!
20:51:40 <warlord> you're welcome
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