In this example we will look at entering clients Ryan and Nina's main residence into their plan and linking their mortgage debt to that residence. Note, this is only an example of how you might enter and property and link the corresponding debt. You will want to customize your entry to reflect your clients situation.
Ryan and Nina co-own a home which is presently worth $975,000. They have owned their home for 5 years and purchased it originally for $795,000.
- To enter their home into the plan, select Property in the + button bottom right in the Dashboard
- Owner: The property is jointly owned. Check both Ryan and Nina are selected and shown in the owner window.
- Property Name: Enter "Home".
- Type: Select Principal Residence, the default.
- Market Value $: Enter $975,000, the present market value of the home.
- Purchase Value $: Enter $790,000, the total original purchase value of the home, including any portion of the home's cost that was financed.
- Is this a Future Purchase? Select “No” in default.
- Growth Rate: The property’s market value will increase over time at this rate. The default rate is taken from Plan Settings > Inflation/ Growth > Property Growth/ Depreciation Rate. You can change it for individual properties in this box. Leave as the default here.
9. Click Save.
By viewing the Assets chart you will now see a ‘Other Assets’ in there, growing in value over time (see Growth Rate above). This is their family home.
Linking their mortgage debt this property.
Ryan and Nina’s home was financed with a mortgage, on which they owe currently owe $710,000. The mortgage has an interest rate of 3% and a minimum monthly payment of $3,331.
- To enter their mortgage into the plan, select Debts & Loans from the + button bottom right in Dashboard. Then select Debt.
- Owner: As the primary client, Ryan is already selected as the debt owner, by default. Nina co-owns this debt with Ryan. Select Ryan and Nina's name in the drop down so it is jointly owned.
Make the following entries and selections in the fields to the left side of the screen.
- Name: Enter "Home Mortgage".
- Set the Type as Mortgage.
- Balance $: Enter $710,000, the current balance of the MacDonald’s mortgage.
- Interest Rate %: Enter 3%, the current interest rate on the mortgage.
- Payment Type: Select Repayment mortgage.
- Payment $: Enter $3,331.
- Applied: Select Monthly.
- Interest is Tax Deductible? Select “Yes”.
- Receive Debt Amount as Cash: Select “No”.
- Click the Linked Properties > Link to an Existing Property
- Click on the property in the list to link the mortgage to the family home.
- A link icon is shown next to the debt in Dashboard view indicating items in the plan are linked to this property.
Note - Since the debt is linked to a property (the McDonald’s’ home), there is no need to select a start event for it. Notice that the Timing area is now greyed out. The debt has inherited its timing from the linked property meaning that whenever this property is liquidated, if any balance remains due on the debt, proceeds from the sale will be applied first to paying off the balance of the linked debt.
If you were entering an unsecured debt, a start event would need to be selected on the Time panel to indicate when the debt is to become active in the plan.
Multiple mortgages could be entered and linked to a single property if necessary.
5. Press Save
Note – You may prefer creating the Debt whilst entering the Property. When entering the Property click ‘+ Create and Link a New Debt’. In here you can create the mortgage and as it is created in the Property section it will already be linked to the Property.