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eMoney Tip of the Week: Refinancing a Mortgage

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Mortgage refinances are a common technique leveraged by borrowers today, especially with interest rates a historic low. As such, it becomes increasingly necessary to be able to reflect such transactions taking place in a client’s plan.

How do you show a Re-finance in eMoney?

Refinances in our software can be modeled in 2 easy steps:

  1. Pay off the existing mortgage
  2. Create a new mortgage w/ the new interest rate

Sounds easy right? Let’s take a look at it in action:

Our clients Mark & Rhea have a mortgage on their home for $500,000 with an interest rate of 4.5%. After speaking with a mortgage broker, they feel comfortable that they will be able to refinance to a lower interest rate of 4.0% next year.

Step One: Pay off the existing mortgage

First, let’s navigate to their mortgage in Advanced Facts:

Select the Mortgage in your Advanced Facts

Now that we’ve opened the mortgage, let’s navigate to the Extra Payments tab located on the top:

Set up a one-time payment to pay off the outstanding balance.

Once inside the Extra Payments tab you will notice two columns – Per Payment Amount and One-Time Amount. In order to pay off the balance of the mortgage, we will need to enter a value greater than the remaining balance of the mortgage in either one of these columns

Note: Entering the balance of the mortgage in the Per Payment Amount field will pay the mortgage off in the beginning of the year, where the One-Time Amount field will pay it off at the end of the year.

Tip: If you don’t know what the balance of a mortgage is going to be in a future year – check the Worksheets & Schedules – Amortization report.

Step Two: Create a new mortgage

Navigate to Buy/Sell Transactions in Advanced Facts:

Create a Buy/Sell transactions to simulate the refinanced mortgage.

Once you create your Buy/Sell Transaction, select an appropriate name and indicate the year in which the refinance is to take place:

Next, select Mortgage from the Add Asset to Buy / Loan drop-down located on the right of the screen and click Add Asset:

Finally, fill out the terms of the mortgage from the point of the refinance on, making sure that all of your dates reference the year in which the refinance takes place:

– John Costello, Financial Planning Analyst

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