How to track Additional Principal payments towards a Mortgage

rosachin21k

I am someone who pays down my house and so I make hefty monthly payments to my mortgage company. These payments are not really expenses as they are Home Equity. Because they are not expenses I exclude them from Reports and Spending Plan. Question is how do I track how much I contributed to my home equity for the year? Because they are hidden I can no longer see them in Reports. This is the only issue I have with Simplifi so someone please help. I am not able to find a solution for this.

Coach Kristina

Hello @rosachin21k,

If you're wanting to track your home equity payments without having them showing as an expense, then this may be a solution:

1. Add a manual asset account for your home equity. For instructions, click this link (Web app) or this link (Mobile app).
2. When you document your mortgage payments, create a split transaction to document the part that is paying the debt & the part that is paying towards equity (you can also add additional splits, depending on what you need to document).
   
3. Document the part of the transaction that is for equity as a Transfer to the equity asset account.
   

Since transfers are considered neither income nor expenses, this will allow you to document without it showing as an expense. Click this link for more details.

That Asset account would reflect in your net worth, although you would be able to exclude the account from reports.

I hope this helps!

Coach Kristina

Thank you for your reply,

There are a couple of other possible solutions, although neither would be perfect.

1. Instead of using an asset account and transferring the equity part of the payment there, you could use the Credit Card Payment category, then create a Home Equity tag to label it. The Credit Card Payment category does not show in the spending plan as an expense (the logic being that the individual credit card transactions would already be showing as expenses, so having the payments on the card also show as expenses would functionally be double counting). The down side to that is your extra payments towards home equity would show up as Credit Card Payments in reports and in your register.
   
2. You could use your existing Asset account for your Home, and have the transfer in the split transactions go there. Then, to avoid double counting that value, you'd need to adjust the Opening Balance on that asset account down by the same amount you just transferred in. This link gives more information about editing transactions. This link gives more information about asset accounts.

Neither of these solutions is perfect, but hopefully one will be helpful!

ajbopp

I personally have always counted my mortgage payments as expenses, rather than as transfers to my home equity. Can I ask what the benefit is to making this transaction a transfer? In my case, I don't even have the option to set this or any payment up as a transfer to my home equity. How did you manage this?

As for solving the immediate problem, I might suggest considering hiding these payments only from the Spending Plan, and not reports.

rosachin21k

I split my mortgage payments into interest and equity. I count the interest as an expense and equity as not an expense. I then make additional payments to my equity. So I need a way to track how much home equity I have gained this year or how much I am paying towards home equity in total for future planning and goals.

I cannot really hide from reports as that will then mess up my expense totals in the reports. I don't like counting my equity as an expense.

rosachin21k

Hello @Coach Kristina

First off, wow! Thank you so much for going into such detail with screenshots and steps to lay out the solution. I especially appreciate your effort to understand my problem before diving in. I am trialing different spending and net worth tools right now and I am leaning Simplifi for the amazing features it has and the amazing support it receives from coaches like yourself.

While the solution you described is sound in theory, it unfortunately doesn't work for me due to double-counting my home equity. I have both my home value and loan account added in Simplifi, and the difference between the two already reflects in my net worth. Adding it again causes double-counting of my home equity.

I searched for a way to exclude specific accounts from net worth calculations, but it appears that's not currently an option. Therefore, while your proposed solution is excellent in principle, it wouldn't be applicable in this scenario. I want to reiterate my sincere gratitude for taking the time to understand my issue and providing such a detailed explanation. It means a lot.