Purchasing a house in Money (first time buyer)

Microsoft money allows you to track loans and assets. Assets could include your house and loan could include the mortgage.

If you want to track your house and the associated loan, then you will need to follow the steps below.

First - the purpose of the steps is to ensure you are net-worth neutral at the end of the process. Your finances have been reorganized, but you don't lose any net worth (except for costs directly attributable to purchasing the house or loan).

You will need enter the details of the mortgage. This can be done by creating a new loan account. I typically use a name relating to the lender (for example, 'Mortgage - Citibank'). The loan value is the amount you are borrowing and the other details can be entered based on the information your lender has given you (note, if you have an interest-only loan, see Article 73).

You can create an asset account for the house. Again, the name is up to you, but I personally use the address as part of the account name (for example, 'House - 1234 AnyStreet').

Assets can have associated loans, and in the asset details you can put this information in.



After adding the associated loan to the asset, the equity value will be negative. You will then need to start adding value to the asset, as at the end of the process, your net worth is unchanged (except for costs directly attributable to the loan or asset purchase).

You should add a 'Loan principal received' transaction to the asset account (you can find this under 'Other Income') - this will balance the asset value and the loan value. Some people suggest that you don't use a category - this is valuable advise if you don't want this large amount to show as 'income' in some reports.

If you additionally put some of your savings into the purchase, then this can be recorded as a transfer transaction from the savings account directly to the asset account.

At the end of the process, you thus have an asset with a value of what you paid for it, a loan, and a depletion of savings. These figures, will mean a net worth change of $0.

If you have associated costs, then these need to be paid from the account you write the check from, or, if they are added to the loan, added as additional items on the loan.

Example

For example, on a house purchase of $200k, loan of $150k and using $50k of your $125k savings.

There will be the following transactions:

1. Creation of a loan account with balance of 150k owed
2. Creation of an asset account (0 balance)
3. Deposit in the asset account of the balance of the loan (150k)
4. Transfer from the savings account to the asset account of 50k