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Mortgage Loan Schedule with Show Running Balance shows incorrect Principal Paid

Rick GumpertzRick Gumpertz Member ✭✭
QW H&B 2016 under Win 10:

When I go to the Loan Schedule window for a mortgage and check the Show Running Balance checkbox, the Principal Paid column shows the same amount as the Loan Balance column but negated.  I believe this is due to the Opening Balance transaction (i.e., the original loan amount) being included in the running total.

Because the original loan amount is NOT really a principal payment, it should be excluded from this column.  Only the principal payments that follow the opening transaction should be included in the running total for Principal Paid.


  • NotACPANotACPA SuperUser ✭✭✭✭✭
    edited October 2018
    Remove that opening balance transaction.  It has meaning in the bank's bookkeeping ... but not in your's.
    Q user since DOS version 5
    Now running Quicken Windows Subscription,  Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • UKRUKR SuperUser ✭✭✭✭✭
    edited September 2018
    Ummm, I beg to differ.
    The Opening Balance transaction in the loan account register (assuming a manual loan account, not a connected one) is needed to show how much total you owe at the start of the loan. Do not remove it! It would mess up your loan calculations. And it would mess up your actual Net Worth calculations, too.

    The Payment Schedule's "Principal Paid" column, without "Show Running Balance" selected, shows how much principal payment you have to make every month.
    If you select "Show Running Balance" then this column shows how much money total you actually have left to pay at each payment.
    Here's an example, first without "Show Running Balance" and scrolled right to also show the Loan Balance column:

    Next, with "Show Running Balance" selected and also scrolled right:

    Looking at this 2nd image I see that "Principal Paid" now exactly mirrors the "Loan Balance" column. The Interest Paid column has changed and now shows a running total of interest paid for each payment.

    IMHO, this "Show running balance" option is worthless. It would be much better if the entire Loan Schedule window were changed to be flexible in width, so that it can always display all the columns without scrolling.

    Somebody from Quicken please explain to me what this "Show running balance" option really is supposed to show.
    What were the Quicken programmers trying to achieve with it?
    And why is the window too small and not resizable?
  • Rick GumpertzRick Gumpertz Member ✭✭
    edited August 2018
    I believe that the Interest Paid is correct as shown above when Show Running Balance is checked.  I believe that Principal Paid when Show Running Balance is checked should be $0 for 7/11/11, $1,404,02 for 8/1/11, $2,812.43 for 9/1/11, etc.

    In other words, for the second example above, $97,418.00 should be added to every (negative) value currently shown in the Principal Paid column.

    The net result is that when Show Running Balance is checked, you see the running totals of your principal and interest payments.

  • CC Member ✭✭
    edited September 2018
    I am encountering a similar problem. I tried to transfer the proceeds of the mortgage to my checking account by editing the Opening Balance transaction, and Quicken is considering it a principal payment.

    I noticed that by changing the Opening Balance transaction back to its original state, i.e. as a transfer to the same account, the payment schedule is correct again. Ditto if I change it to any other category. But if it is a transfer to a different account, it messes up the payment schedule because it is considered a principal payment.

    Curious to know if the OP also has the Opening Balance transaction transferring to another account.

    EDIT: Another interesting detail is that if I edit the opening balance transaction and record a split, one of which is an external transfer (i.e. the proceeds to my checking account) and the other line being a transfer back to the original account (i.e. the closing costs, which were deducted from the loan proceeds), there is a double problem: 1. The external transfer is considered a principal payment, as described by the OP. 2. The second line is considered an interest payment, which counts as the first payment and makes the total payments off by one. This second problem can be avoided by changing the second split line to a different category, not a transfer back. The first problem that the OP described would remain.
  • Rick GumpertzRick Gumpertz Member ✭✭
    edited September 2018
    Yes, my mortgage opening transaction is a transfer to another account (the Asset account for the underlying property).  That seems to me to be correct accounting practice.  (If I remember correctly, Quicken set it up automatically when I added the asset account and it asked whether ther was an associated loan.)
  • kuwayamadkuwayamad Member ✭✭
    edited May 2019
    I agree that this is a serious deficiency in the Quicken loan module.  This problem also crops up if loans are disbursed over time, for example, a student loan.  Quicken interprets the first disbursement as the Opening Balance, but interprets all further disbursements as balance adjustments, which it equates to negative principal payments.  This results in a ridiculous situation where your loans at the beginning of repayment start off with a huge negative total in the "Principal Paid" column.  

    This situation can be semi-circumvented by creating a brand new loan account for each disbursement, but its ridiculous to have eight student loans in Quicken when for all intensive purposes it should be one.

    This also becomes an issue if loan repayments are paused for a period of time and accrued interest is capitalized.  The balance increase gets interpreted as a negative principal payment.

    There should be a way to flag balance adjustment entries in manual loan accounts that exclude them from being intepreted as principal payments. 
  • NotACPANotACPA SuperUser ✭✭✭✭✭
    The Loan Wizard is intended for traditional, monthly-interest, mortgage loans ONLY.
    It's not intended to track any other type of loan, and won't deliver accurate results with any other type of loan, especially "Daily-Interest" loans (such as auto loans) or loans that aren't lent-once-paid-monthly, such as your Student loan.
    Q user since DOS version 5
    Now running Quicken Windows Subscription,  Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • kuwayamadkuwayamad Member ✭✭
    edited May 2019
    I agree with you NotACPA, the Loan Wizard is designed for straight forward loans only.  
    However, IMO Quicken developers should focus on extending basic loan calculations, like principal paid and interest paid, to a wider array of loan types.  The wizard bells and whistles with auto billing etc would not really be necessary to equip such simple functionality. 
    Real world loans don't always fall into a standard box.  Capitalization of unpaid interest is common; at present there's no way to record that in Quicken without screwing up the principal paid running tally.
    I also agree with Rick that the appropriate accounting way to record the Opening Balance transaction in a loan account is as a transfer to the account receiving the loan funds.  But Quicken requires the opening balance transaction to be a payment into its own account, in order to make the Principal Paid tally correct.  This is odd functionality, and hampers the end-user's ability to record/understand how funds are moving between accounts.
    Quicken developers could fix this by having a "reconciliation" functionality for loan accounts, similar to reconciliation in bank accounts, in which users could flag which entries reflect principal payments, which reflect interest payments, and which reflect other kinds of balance adjustments.
  • NotACPANotACPA SuperUser ✭✭✭✭✭
    "Quicken developers should focus on extending basic loan calculations, like principal paid and interest paid, to a wider array of loan types. "
    The problem with that is that Q has no way of knowing WHEN a prior payment is applied to your account.  Nor when any other amounts or fees are applied by the Lender.
    And for these "daily interest loans", the amount of interest included in your NEXT payment is entirely dependent upon when THIS payment was received.  Interest, on these loans, is calculated by the lender every day ... not month-by-month as with traditional mortgages.

    Q user since DOS version 5
    Now running Quicken Windows Subscription,  Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • kuwayamadkuwayamad Member ✭✭
    For anyone interested, I've figured out an (inelegant) way to record loan balance adjustments, bank charges, capitalized interest, etc (i.e. non-principal and non-interest payments) in manual loan accounts while preserving the accuracy of running principal and interest totals.

    Say, for example, you were charged a $61.70 bank fee, or had $61.70 of unpaid interest that became capitalized.  You'd want to increase the loan balance by $61.70, but would want Quicken's calculation of principal paid and interest paid on the loan to remain unchanged.

    The trick is to split the $61.70 charge into two $30.85 charges.  The first $30.85 charge can be entered directly into the manual loan register as an increase paid from it's own account.  The second $30.85 charge needs to be entered as a split transaction, with the first line again being categorized as an increase paid from its own account, and the second line (interest paid) being 0.

    As you can see from the register in the first image, Quicken interprets both charges as balance increases, so the loan balance ($61.70 increase) is correct.

    However, Quicken also (oddly) interprets the first transaction as a negative Principal Payment, and the second transaction as a positive Principal Payment.

    This means that the running tallies reported in the loan's Full Payment Schedule, and on the Debt page of the Property & Debt module, are now correct, because the two "half-payments" cancel each other out in Quicken's principal paid calculations.

    Frankly its unfortunate such a workaround is necessary, but at least it works.
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