I wandered into a nice little way to keep track of my mortgage and the equity of our house inside of our budgeting software YNAB. The primary goal for this was to factor in the equity in our house into our net worth. YNAB has a nice feature inside the Reports tab that shows Net Worth. It's fun to see the line on the bar graph escalate as your net worth increases.
Even though the line seems to be pretty flat, we are happy to see our debt, the orange bars, slowly dropping. We are slowly chugging along and paying down car loan debt, then we will be attacking some school loan debt.
So back to the tracking of our mortgage. I added two accounts, both of which are Tracking accounts, not Budget accounts. First, create your Mortgage account. I don't use the auto import feature, because I like to see the large chunks of principal being paid down with our 15 year mortgage, by manually entering the amounts every month. So once you create the account, enter the manual amount of principal on your loan.
When you create this account, the principal amount will show up as a red number, because it's a debt or liability. Next, we need to create an asset account in order to show the value of the house.
Create another Tracking account, and I use the "Other Asset" Account Type. This will create the positive number, to counter the negative number we created with the Mortgage. As the loan is paid down, and the value of the house increases, this will show up in your Net Worth.
How do you keep update the numbers?
Like I said, every month or two I'll jump onto my mortgage account website and find the amount of principal that was applied to the balance for that month's payment. Our loan is through Wells Fargo, and their website is rather easy to navigate.
This is our payment breakdown from our last payment. We are 5 years into a 15 year fixed rate loan. The reason I update the totals every month, is because I fall in love with this loan each time I update. The large dollar amounts being paid down on the balance make the sacrifice worth the cost. So this month, $681.49 was paid down on the principal. I took that number and added to the "Inflow" side of the Mortgage Account register that we created.
Every month, I'll jump into this account, "Add a transaction" and enter the principal amount into the account as an "Inflow". This knocks the amount of the loan down, in turn, causing our Net Worth to increase.
As far as the House Value account we created, I only change this occasionally, because house values don't increase noticeably month to month like the loan does. We will compare our house to a recent sold house in the neighborhood, or look into a Zillow estimate, etc. This part of the equation falls under some grey area, but estimates are close enough to feel confident.
Above is the actual Net Worth graph, only showing the Mortgage and House Value accounts. I love looking at this, especially seeing the $64k increase in Net Worth. This is a great feature of YNAB and also a strong selling point for the 15 year fixed rate mortgage. The first couple years were hard, but after that, we've been so happy seeing large dollar amounts coming off the principal. Next month, we will be breaking below the $100k mark for our principal balance!
Check out YNAB for yourself, we love it, and would recommend it for everyone!
Jack of All Trades, Master of None