8.4. House Mortgage (How-To)

A house mortgage can be setup using the account structure present in Section 8.2, “Setting Up Accounts”.

As an example, assume you have $60,000 in you Saving account, and you buy a $150,000 house. The mortgage is charging 6% APR, and has administrative fees (closing costs, etc) of 3%. You decide to put $50,000 down, and thus will need to borrow $103,000, which will give you $100 after the closing costs are paid (3% of $100,000).

Your accounts before borrowing the money:

Figure 8.2. Accounts Before Receiving Loan

Accounts Before Receiving Loan

The purchase of the house is recorded with a split transaction in the Assets:Fixed Assets:House account, with $50,000 coming from the bank (i.e., your down payment), and $100,000 coming from the Mortgage. You can place the $3,000 closing costs in the same split, and we increase the house loan to $103,000 to include the closing costs as well.

Table 8.1. Buying a House Split Transaction

Account Increase Decrease
Assets:Fixed Assets:House $150,000  
Assets:Current Assets:Bank   $50,000
Liabilities:Loans:Mortgage Loan   $103,000
Expenses:Mortgage Adm Fees $3,000  

The split will look like this in the Assets:Fixed Assets:House Account:

Figure 8.3. Mortgage Split Transaction

Mortgage Split Transaction

Which will give a Chart of Accounts like this:

Figure 8.4. Mortgage Accounts

Mortgage Accounts