How to I track auto and mortgage loans?

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How to I track auto and mortgage loans?

itfarmer
New MMEX User

Posts: 2
Joined: Sun Mar 29, 2015 11:08 am
If my auto and mortgage accounts are just payees, I have no record of my balances which actually are debt. Essentially making blind payments with no record of payoff information.
If I make my auto and mortgage loans into term accounts, I can track the balances but none of my payments appear as "Where the money goes" because MMEX considers it a transfer.
I shouldn't have to choose to 1. maintain balance information; or 2. not see my biggest expenses on any expense reports.
I've only been using MMEX for a short time and I love it, but having no ability to manage the biggest expenses is a deal breaker. I would sincerely appreciate some help with this.
Re: How to I track auto and mortgage loans?
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stef145g
MMEX Developer

Posts: 278
Joined: Fri Aug 13, 2010 9:40 pm
Location: Canberra, Australia
MMEX is based on a simple principle.

Money comes In(Deposit) ---> ("Our System") ---> Money goes Out (Withdrawal)
Money moves around in our system as Transfers and therefore is not accounted.

For a loan, money comes in but is not Income in the true sense, and Money go out of our regular accounts.

Bank Accounts track our regular accounts, and Term Accounts track our other non regular accounts.

In order for us to be able to track something we need to set up an account. For our Auto loan, we need to set up an account in Term accounts. This separates money being confused with our regular accounts such as Savings Cheque and MasterCard credit accounts.

Bank Accounts

Savings
Cheque
Mastercard

Term Account
Auto Loan

What are the payees?

The Bank - Gives us the loan and gives us interest payments. We also need to make payments to the bank

This now allows us to create categories in order to track this. Categories:
Auto : Purchase
Auto : Bank Loan
Auto : Loan Interest
Auto : Loan Repayment 

Assuming loan amount for $10,000 with repayment $500 per month, interest at $100 per month.
Transactions:

Account Term: Auto Loan - Deposit $10,000 Payee=Bank, category=Auto: Bank Loan

Bank Interest: Transactions: Term: Auto Loan - Deposit $100 Payee=Bank, category=Auto: Loan Interest
Repayments: Transactions:  Term: Auto Loan - Withdrawal $500 Payee=Bank, category=Auto: Loan Repayment

Money comes into regular accounts.
Important:
When a payment is made, we also need to transfer money from our regular account to our Term Account: Auto Loan
Transfer: Account: Savings to Account Term:Auto Loan $500, **Category: Auto: Loan Repayment
**We may wish to use a different category for the transfer

This allows us to show us the current balances, how much we owe, and how this affects maintain accounts.

This demonstrates how to set up and use the accounts, but it also highlights short comings in the reports. We need to consider some distinction between term and regular accounts. The other important thing is that not all money coming in is Income.

For a mortgage account, the initial deposit may me omitted and the account initialised as a negative amount. To adjust the Home page, the Asset can be used to correct this offset.

At present, the use of loans and mortgages tends to upset the grand total on the home page, which means that the simple model of MMEX in some instances has short comings which we can improve on.

For me, MMEX does not do everything, but is a simple and easy way to keep track of finances.
Taking into account and knowing the shortcomings, we can accommodate for shortcomings by using the other reports.
Regards: Stefano
Re: How to I track auto and mortgage loans?

omalleypat
MMEX Developer

Posts: 175
Joined: Tue Jul 28, 2009 4:34 pm
Location: Atchison, KS
Sample: Mortgage Payment $1000 (interest  $700, principle $300).

Under the current setup as Stef described, this would be entered as two transactions:
  1. transfer from Checking to Mortgage term account of $1000
  2. withdrawal from term account in the amount of $700 (payee = bank)
For reporting, MMEX treats this as an "expense" of $700, although I think many would consider it a $1000 expense as the OP suggested.

I wonder if it would be possible to add a checkbox (either on a per account or global basis) which would treat transfers to term accounts as "expenses" for the purposes of reporting and just ignore withdrawals from term account. Using the sample, the $700 withdrawal would be ignored (since it is from a term account) and the $1000 would be the amount in the Red/Blue bars on the home page. This way I think it would reflect how most people treat these types of payments and would make the reporting more useful.

I haven't thought through the ramifications of this fully or looked into the code to see how hard it would be to implement, just an idea...
Re: How to I track auto and mortgage loans?
User avatar
stef145g
MMEX Developer

Posts: 278
Joined: Fri Aug 13, 2010 9:40 pm
Location: Canberra, Australia
Term accounts were originally intended for a greater variety of investment type accounts, in order to split the presentation of account balances. This also works well for loans, but tends to upset the current reporting structure to some degree. Treating transfers to term accounts as expenses, would not work, because this would affect this account type when used for the original purpose.

If we create a separate account type: Loan Accounts, this could possibly become feasible. Further analysis using this approach would be required.

Using the "Adding a check box" approach, would need to be done on a transaction basis., This information could be stored within the existing database structure by using a multiplexing method of data storage but this would add further programming complexity and possibly degrade performance. Therefore not recommended.
Regards: Stefano
Re: How to I track auto and mortgage loans?

itfarmer
New MMEX User

Posts: 2
Joined: Sun Mar 29, 2015 11:08 am
Thank you for your help. Great software!
Re: How to I track auto and mortgage loans?
User avatar
stef145g
MMEX Developer

Posts: 278
Joined: Fri Aug 13, 2010 9:40 pm
Location: Canberra, Australia
Giving this question a bit more thought, has given me a better solution to tracking mortgages.

In the above examples, we consider income as remaining within the system, therefore we transferred money from Savings to Term Accounts.

If we consider that for a mortgage, we have 2 systems in MMEX, the solution becomes simpler. This means that if we view our repayments as an expenses, we also need to consider that our home as an asset, is actually providing us with an income in the form of savings. Setting this up in MMEX now becomes simple.
Bank Accounts track our regular accounts, and Term Accounts track our other non regular accounts.
Because of the above statement, we can also treat accounts in Term Accounts as separate from money comes in and out of Bank accounts.

In Term Accounts , when we set up our Home loan account with a negative value, we also need to add an Asset to the same value as the home loan to offset this negative amount.

Money Flow:
( (+) Money IN: Wages ) ----> (MMEX Bank Account: Savings) ---> ( (-) Money OUT: Home loan repayment )

( (+) Money IN: Home loan repayment Asset) ---> (MMEX Term Account: Home loan) ---> ( ((-) * (-) = +) Money OUT: Home Loan amount reduction)

In this scenario, interest on the loan is added to the Term Account: Home loan as a withdrawal. This makes the loan repayment bigger.

According to MMEX, money goes out of the system via Bank Accounts and comes back in as an asset increase.This way the reports now behave correctly to some degree. If we only consider true income being added to Bank Accounts, and discard any income from Term Accounts as being true income, then this creates a better view of our finance position.

Hopefully this is a better solution.
Regards: Stefano
Re: How to I track auto and mortgage loans?
User avatar
fitikoko
New MMEX User

Posts: 4
Joined: Mon Oct 12, 2015 4:15 am
Great software !
By the way very interesting topic. You are describing, I think, most important thing for those who have several mortgages, cash loans, etc. in different banks.
I wonder guys if you plan to implement additional account for mortgage loans, cash loans, etc.
It would be nice to be able to generate reports for all loans in our household and know how much actually goes to the bank paid in interest and how much paid in principal  :)
The best solution in mmex would be a transfer from the current account to credit account, as it is in real life (in our banks), treating transactions from current account to credit account as an expense (because in real life it is our expense. Finally we have to give money back to the bank) and brake installment into two parts: principal and interest.

Anyway, Thank You so much guys for what you have done so far
Re: How to I track auto and mortgage loans?

sterling
Super MMEX User

Posts: 82
Joined: Thu Dec 11, 2014 2:40 am
MMEX already can do reports to show this kind of progress towards paying loans etc.

I have similar reports to show savings progress, with graphs, accumulations per month/year etc.

MMEX can show any kind of report imaginable due to the powerful database under lying it and SQL/HTML custom report power.
Re: How to I track auto and mortgage loans?

Alexex
New MMEX User

Posts: 2
Joined: Mon Oct 03, 2016 1:03 pm
Hi there,

I'm just getting to know Money Manager EX and I'm already loving it.
There is just one thing I can't understand.. Loans and/or mortgages...

I can't get stef145g  example to work.. Hope you can guide me through this..

Let's say I opened a Term "Loan" Account with an inital deposit of $1.000, so I have "$-1.000" in the balance. No interests have to be paid to make it easy.

I transfer $100 from my savings account every month to the "Loan" account, so the amount is now $-900.

Following stef145g's example, I would make a  "Withdrawal $100 Payee=Bank", which I could recognise as an expense, but the amount of my Term "Loan" account would switch back to $-1.000!?

I hope you understand what my problem is, english isn't my native language and I seem to have problems expressing my question.. :|

Hope you can help me anyways, would be great if you could make it work for me!

Thanks in advance!!
Alex
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