Setting up loans

[Jason Rennie]

Welcome to the great world of house buying :)  I bought a house just over 
a year ago and have already seen it appreciate in value (we were worried 
that it might go the other way!)

punchyaustin@yahoo.com said:
> House -> Asset Unrealized Gain -> Asset Loan -> Liability 

You're close.  That unrealized gain is actually income.  It's an 
investment gain in the same way that capital gain from stocks is an 
investment gain.  Here's an example scenario.  House bought for $100k 
with $10k cash, $90k loan.  It's now appreciated to $120k.

Pre-house: $10k cash asset

Buy house: $100k house asset
            $90k mortgage liability

Gain: $120k house asset
       $20k gain income
       $90k mortgage liability

Something complementary happens with cars.  They constantly depreciate.  
I take care of this by checking the blue book value of my car each year 
and counting the decrease as a car expense.

Buy car: $8k car asset

1 year later: $7k car asset
              $1k depreciation expense

Hope this helps.

Jason D. M. Rennie
MIT AI Lab
jrennie@ai.mit.edu
(617) 253-5339
http://www.ai.mit.edu/~jrennie/