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Automatically Track Asset Value by Loan Payments RRS feed

  • Question

  • Hello members!

    This is my first question in this forum, so I apologize in advance if there's already a related thread.

    I started to use Microsoft Money in the last year and since them, I've been exploring mainly the Banking features. Now I want to track the value of an asset (house), assigning it to a loan account.

    According to the book "MS Money for dummies" and some internet sites, if your Asset account is assigned to a Loan Account, the payments done here, will update the value there, but this is not happening to me or I'm doing something wrong, or worst, I understood everything wrong.  I'm registering the loan payments by entering transfer from my main checking account. The remaining balance of the loan account is being updated correctly at each transaction, but the asset value remains 0,00.

    Is there a way to automatically update the value of the asset, or I have to enter individual transactions according to the loan payments in order to balance the both accounts?

    Thanks in advance!

    Douglas

    Monday, June 16, 2014 3:26 AM

All replies

  • I don't know.  I looked in http://umpmfaq.info/ but I did not find that covered. However you might find some topics of interest (no pun intended) there.

    I think that use of Money is not the most common, because there has not been much discussion on that.

    Monday, June 16, 2014 7:21 PM
    Moderator
  • I think that you have been misled by the "MSMoney for Dummies" book.  The value of your house is independent of your mortgage payments.  So the value of your house asset account does not change when you make a mortgage payment.  Rather, the amount of your mortgage (liability) decreases.  If you look at the mortgage loan account you should see that the mortgage principal payments are being credited there, so its balance is decreasing.

    I think that you are interested in seeing the equity in your house reflected in Money.  You can calculate that by taking the difference between the value of your house asset account and the value of your mortgage loan account.  


    Bill Becker

    Tuesday, June 17, 2014 2:17 AM
  • The asset value does not change when loan payments are made.

    You should have created the Asset account for your house with the initial value as the purchase price and chosen the option to associate a Loan with that asset. Money would have prompted you for the details of the loan and its repayment terms.

    It sounds as if you created the loan account and then the asset account, so they are not linked. The repayments you are making correctly transfer from your current account and are just loan principal and interest.

    If you go to your House account and select Change account details you can set the purchase price and date and may be able to associate the loan account you created separately. Loan repayments will still not change the asset value.

    Tuesday, June 17, 2014 7:07 AM
  • Not sure about the For Dummies explanation, but here's an alternate one--same as Bill and Domonic have provided.

    Asset value and equity are not the same thing and asset value is decoupled from your loan balance. Value is what the asset is worth in the marketplace. Equity is how much of that value belongs to you after the bank gets its principal back. So, if you have an asset account that reflects the value of your asset, subtracting the balance of the loan account liability from the balance of the asset account yields your current equity. (In the Account List display, liability is negative and asset is positive so adding them together gets you the equity...)

    The technique described in the http://umpmfaq.info item on how to account for a house closing settlement says to transfer the purchase price from the transaction to the asset account. Since you just paid it, that must be the market value. Going forward, the Asset value can be increased by, say, treating the expense to install a swimming pool as a Transfer:Asset account not a Housing:Major Improvements or some other expense type. In the past, when I wanted to get the Asset account value aligned with what I thought the market value was, I just balanced the account to a new value and let Money enter an Account Adjustment with no income category assigned.

    IIRC, somewhere it does allow "linking" the Loan account to the Asset account. But I'm not sure this is used anywhere in the UI to tell you they are linked and am pretty sure (haven't played with this in years) that there is no automatic entry of transactions in both accounts. Given my explanation of the accounting above, there wouldn't be a reason for one.

    p.s., great to hear there are still some new adopters of Money. Its a brave thing to do, given its abandonware status.

    Saturday, June 28, 2014 5:55 PM
    Moderator
  • I use the method described by Dick for my home and its associated mortgage.  For my autos, I deprecate the asset account on a 10 year simple method using scheduled bills to enter an expense into the asset account.
    Tuesday, July 1, 2014 11:58 AM