[GNC] how to track home equity with mortgage loan Gnucash 4.2

[David Cousens]

Nathan

First thing is withdrawals from your bank account in your books are credits
not debits. They will appear on the bank statement as debits but that is
because in the banks books your account is a liability.

The equity in the home is given by the difference between the balances of
the relevant asset account and the relevant liability accounts because of
the accounting equation
 Assets = Liabilities + (Equity + Income -Expenses)
which is the same as 
Assets - Liabilities = (Equity + Income -Expenses) 

Your equity account balances are generally increased by income and decreased
by expenses usually recorded in the specific equity temporary top level
accounts which have these names.  Your income is normally partitioned by
source not what it is used for.

The best way to handle this is possibly to prepare a report which generates
the difference in the balances between The Asset:Home and Liability:HomeLoan
accounts.

The transaction recording a Payment in your books will be
                                                           Dr                  
Cr
Bank account                                                        1000
Liability:HomeLoan:Principal              400
Liability:HomeLoan:Interest&Fees     600

Here the 2 Liability accounts shown would be subaccounts of and sum into a
placeholder account Liability:HomeLoan

Since you are separately recording the interest and fees in the Liability
when the bank adds these charges each month and you record them in your
books you would create the following transactions:
                                                                       Dr              
Cr
Expenses:HomeLoan:Interest and Fees      600
Liability:HomeLoan:Interest&Fees                                   600

After the above transactions  you should have the following balances
                                                Bal
Asset:Home                         200000
Liability:HomeLoan              149600    =150000  + 600 - 600 - 400
Equity in Home                      50400    =200000 -149600

under the general equity account if you had an account with the initail
equity of 50000 as its inital balance
you could create a dummy transaction each month with a transfer from you
general equity balance to the equity for the home loan;
                                                 Dr                         
Cr
Equity                                     400
Equity:Home                                                        400

which would record the change in equity in the home   which would then have
a balance
                                               Bal.
Equity:Home                       50400

This is necessary because your transactions to record the earning of income
and the expenses are already recorded in the total value of equity via the
Income and Expense accounts.

These could be combined in a single multisplit transaction with the payment
transaction and also the transaction recording the interest charges as
follows

                                                                      Dr              
Cr
Expenses:HomeLoan:Interest and Fees      600
Liability:HomeLoan:Interest&Fees                                   600
Bank account                                                                
1000
Liability:HomeLoan:Principal                        400
Liability:HomeLoan:Interest&Fees                600
Equity                                                            400
Equity:Home                                                                  
400


Hope this helps.

David



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David Cousens
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