Right way to record a house loan

[Alex Barclay]

Randall Hopper wrote:

>     I'm not sure how to handle equity on mortgage payments so that the Net
>Worth report in GNU Cash actually works.
>
>For example:  $100k house, $10k down, $90k loan
>
>     (Assets      - Fixed Assets - House   ) = $10k
>     (Liabilities - Loan         - House   ) = $90k
>     (Expenses    - Interest     - Mortgage) = $0
>
>Is this right?  Or should the $10k downpayment be put in an Equity account?
>
>Then when making mortgage payments, where does the Principal part of the
>payment go: as a deduction to the Liability Loan, or as an increase in the
>Asset (or Equity) account?
>
>Thanks,
>
>Randall
>
I handled it by stating actually what happened.

1) I took money to closing. say $15000 with $5 to the bank for the 
cashiers check. Of this $5000 were closing costs (which are say $2000 
for closing, $3000 for mortgage interest and points)

I now have a split taking $15005 from my checking account and $90000 
from a liability representing the mortgage. $5 goes to an expense 
account for bank charges, $2000 goes to an expense account for closing 
costs, $3000 goes to an expense account for mortgage interest (this will 
be an important one for tax reasons) and the rest, $100000 goes into an 
asset _your house_

This means that you have an asset worth $100000 but a liabilty of 
$90000. You now have a "net worth" of $10000. Note that your net worth 
actually decreased through this transaction because of the closing costs.

Hope this helps

Alex.