Why can you not budget principle when setting up a mortgage?

collimaw

I created a mortgage account and split my payments Principle, Interest, PMI, Hazard Ins and Real Estate Tax. When I look into the budget I see the splits no problem but when the actual payment hits the principle goes to the mortgage account detail (as it should) but does not show up in the budget as paid and there fore shows me under budget for the principle. You would think that when the mortgage is set up automatically there should be an internal trigger to update both. Now if I split the amounts outside the account setup it works but does not update the account. The account is updated when transactions are downloaded.

NotACPA

Because that's a Transfer (it reduces your debt, but doesn't impact your net worth), not an Expense (which reduces your net worth).

You can, however, select to include transfers in your Budget.

collimaw

Actually the principle increases net worth by reducing total liability of the Asset which in turn appears to increase Net Worth. Total Assets - Total Liabilities = Net Worth
Using the transfer option it pulls the entire amount for the transaction. Principle, Interest and Escrow values also not reflected properly in budget.

I have done both ways and have not liked either I may have to go back to manually doing it with no transfer to the Mortgage until I download the transactions.

NotACPA

BUT when you make that Principal and Interest payment, you're reducing your checking account (reducing your Net Worth) and decreasing your Principal owed (making it less negative).  

The combined action of the checking reduction (principal portion) and principal reduction is a net $0 to your net worth.

The interest portion of that payment is an expense, which also reduces your Net worth ... but without an offset.

And, I assume you mean Principal payment, because what you've written makes no sense. "the principle increases net worth by reducing total liability"

You need to use, in your payment, a SPLIT transaction ... with some parts going to the loan account and other parts going to expenses, or to other transfers such as Escrow accounts.

BTW, take another  look at my signature area ... I think I've got the credentials re: this discussion.

Chris_QPW

collimaw said:

Actually the principle increases net worth by reducing total liability of the Asset 

Wrong.

Here is an example.

Checking account: $0
House worth: $100,000
Loan on house: -$90,000
Total net worth: $10,000

Paycheck comes in for a net of $100.
Checking account: $100
House worth: $100,000
Loan on house: -$90,000
Total net worth: $10,100

Transfer $50 from checking to house loan:
Checking account: $50
House worth: $100,00
Loan on house: -$89,950
Total net worth: $10,100

collimaw

Now that I look at it closer It's more appearance than anything, the transactions are correct but here's how it looks in the budget:
Budget Actual Balance
-Mortgage 2171 2171 0
Home Insurance 86 86
Interest 672 672
PMI 220 220
Principle 0 0 0
Property tax 1,193 1,193


If I add in the transfer TO at the bottom of the page it shows

TO Mortgage account 648 648 0

Under the Category Mortgage the principle is not shown because it is a transfer.
the total mortgage payment of 2171 does not reflect the actual transaction of 2818 that was the actual transaction by the mortgage company from my bank account.

All I am saying is it would be nice to have the principle reflected under the mortgage category so the total mortgage balances back to the actual transaction.

It's just presentation.

I have done it manually in the past and not had the transfer to the mortgage account. I let principle and interested be updated by the bank transactions alone.

I will not argue the calculation of net worth!
Truth be told when paying a loan (Mortgage, Car, etc) it it not really a transfer! If you get a statement and write a check or EFT not a TRANSFER in the Accounting sense. Just saying... Quicken simplified it.

Even though EFT stands for Electronic Funds Transfer, behind the scenes it is merely a electronic check that is sent to the clearing house.

Thx.

collimaw

last thing didn't post right anyway I am done!