Basic bookkeeping account entries for a house purchase and mortgage?

Question

I borrow 200,000 to purchase a house worth 250,000, putting down 50,000 of my own. The borrowing is at 5% over 30 years. What are the basic double-entry bookkeeping entries I must make to record this fact?

Answer 1

To record the purchase:

Assets:Home Purchase, debit $250,000

Assets:Cash, credit $50,000

Liabilities:Mortgage Loan, credit $200,000

To record mortgage payment, monthly interest expense, and principal pay-down:

Month 1 =

Mortgage Interest Expense, debit $833.33

Mortgage Loan, debit $240.31

Cash, credit $1,073.64

Month 2 =

Mortgage Interest Expense, debit $766.52

Mortgage Loan, debit $307.12

Cash, credit $1,073.64

These figures are derived from an amortization schedule that can be provided by your lending institution. Each month, check your current mortgage statement to reconcile the principal balance and year-to-date interest with the balances per your records.