Home Equity Loan setup

[Mike or Penny Novack]

Bill Cummens wrote:

>Hello Gnucast support,
>I am a new user to GnuCash. I am having trouble setting up a Home Eq. loan. I've tried following the example in the Help manual but it didn't come out right.
>I have a $100.000 loan out of which there are deductions of $1500 in service fees and a $50,000 disbursement to pay off another loan. This leaves me with a $48,500 loan at 3.15%. How do I set this up? Each time, as I enter in my monthly payment, will it automatically decrement the interest portion and increase the principle portion?
>Thank you in advance for your help.
>
>Best regards,
>Bill Cummens
>  
>
Except the USUAL way a home equity loan is used (at least in its early 
years) is much too flexible for anything automatic to be useful. 
Generally after a certain period where the loan is in effect a "line of 
credit" it may become a fixed loan and you can no longer increase the 
amount taken out, only pay it off, and THEN automation may be useful. 
Are you saying that you have ALREADY maxed out the line of credit?  You 
say that you have taken out a loan for $100,000 (that's the line of 
credit amount) and of that you have used 51,500 (paying off that other 
loan and the service fees).

That does NOT mean you have a 48,500 loan. The 48,500 is the amount of 
credit remaining. At present you have a 51,500 loan.

Each month you will get a statement showing any amounts borrowed and any 
principle paid off and the amount of interest owed on the balance. 
Generally with a home equity loan, during the flexible period, you only 
HAVE to pay that interest. You SHOULD also pay down the principle, but 
the amount would depend on your funds that month.

Michael