Quicken Community is moving to Single Sign On! Starting 1/22/21, you'll sign in to the community with your Quicken ID. For more information: http://bit.ly/CommunitySSO

How do I track home loan mortgage interest (MAC)

I have a new mortgage account that includes escrow to pay tax and insurance.
The mortgage account connected with the bank and is linked with Quicken.
I want to use splits so I can track principal, interest and escrow funds held by the bank.
What is the best way to track the mortgage interest payments in Quicken?
Tagged:

Best Answers

  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Accepted Answer
    I'd suggest you start by opening Quicken Help on the Help menu, and clicking on Loans at the bottom of the right column. There's a pretty decent explanation of how to set up your accounts there.

    Another thing you might want to do is
    • create a copy of your Quicken data file, in case you mess something up
    • create a new dummy loan to experiment with, clicking "My bank is not in the list" and then Add Manual Account instead of linking to your actual financial institution
    • click Finish, then Add Loan terms
    • in the loan terms setup screen, on the right side there's an area to "add extra principal, insurance, tax, etc."; click the + icon there and you can add a transfer to your escrow account
    • to delete the dummy loan, Control-click on it in the left sidebar and select Delete from the pop-up menu
    After you've had a chance to explore, post back here with any questions you have.

    Quicken Mac Subscription • Quicken user since 1993
  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Accepted Answer
    Sorry, I clicked too soon on my response above; I was going to add...

    The basic idea you want is to have your Loan account, a liability, and also create an Escrow account, an asset. When you make each monthly mortgage payment, you'll have three split lines:
    1. Interest paid, an expense using Category Loan Interest
    2. Principal paid, a transfer to your Loan account
    3. Escrow paid, a transfer to your Asset account
    When your institution pays your taxes from the escrow account, you can just enter that transaction manually in the Escrow account: an expense to the appropriate tax category. You may be able to get this all to download from your financial institution, but if it turns out to be more trouble than it's worth, I'd just enter it manually, since it's typically just a couple payments per year.
    Quicken Mac Subscription • Quicken user since 1993
  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Accepted Answer
    Ah, "Adjustment" and "Transfer" rear their ugly heads! ;)

    The "Adjustment" category and "Transfer" category are a special ones Quicken created which I wish they hadn't. Well, I know why they did it, but I think it confuses more people than those it helps.

    In short, I'd say do NOT use "Adjustment" or "Transfer" as a category. That makes a transaction basically invisible; it's neither income nor expense; it just adjusts the balance. I also suggest that you do not have any transactions which have both a Category and a Transfer. If you're entering a Transfer to move money from one account to another, select that account in the Transfer column, and in Category field you'll see "Transfer:[Account Name]". (As a shortcut, or if you don't want to use up the horizontal space in your register to display the Transfer column, you can also enter a transfer in the Category field by typing the open bracket -- [ -- and then trying or selecting the account you're transferring to. When you save the transaction, it will show as "Transfer:[Account Name]".)
    My concern is since asset category type is income and loan type is expense…
    Nope, nope, nope. An Asset is a type of account, not a Category type. Assets are not income. Similarly, Loans are a type of Account, not a Category and not an expense. If you move money into your escrow (asset) account as a transfer from your checking account (as a split of your mortgage payment), it will not show up as income. When you enter a payment of taxes or insurance from your escrow account, those will show up as expenses -- just as if you'd personally written the check from your checking account.

    When you pay your mortgage payment out of your checking account, and one of the split lines has Interest as the Category, this is an expense; the split line that transfers money to your loan account is not income or expense; it's a transfer of funds which reduces your checking account balance and reduces your loan account balance. The split line which transfers money to your escrow account is also not income or expense; it's a transfer of funds which decreases your checking account and increases your escrow account.

    Does that make any more sense, or are you still confused?
    Quicken Mac Subscription • Quicken user since 1993

Answers

  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Accepted Answer
    I'd suggest you start by opening Quicken Help on the Help menu, and clicking on Loans at the bottom of the right column. There's a pretty decent explanation of how to set up your accounts there.

    Another thing you might want to do is
    • create a copy of your Quicken data file, in case you mess something up
    • create a new dummy loan to experiment with, clicking "My bank is not in the list" and then Add Manual Account instead of linking to your actual financial institution
    • click Finish, then Add Loan terms
    • in the loan terms setup screen, on the right side there's an area to "add extra principal, insurance, tax, etc."; click the + icon there and you can add a transfer to your escrow account
    • to delete the dummy loan, Control-click on it in the left sidebar and select Delete from the pop-up menu
    After you've had a chance to explore, post back here with any questions you have.

    Quicken Mac Subscription • Quicken user since 1993
  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Accepted Answer
    Sorry, I clicked too soon on my response above; I was going to add...

    The basic idea you want is to have your Loan account, a liability, and also create an Escrow account, an asset. When you make each monthly mortgage payment, you'll have three split lines:
    1. Interest paid, an expense using Category Loan Interest
    2. Principal paid, a transfer to your Loan account
    3. Escrow paid, a transfer to your Asset account
    When your institution pays your taxes from the escrow account, you can just enter that transaction manually in the Escrow account: an expense to the appropriate tax category. You may be able to get this all to download from your financial institution, but if it turns out to be more trouble than it's worth, I'd just enter it manually, since it's typically just a couple payments per year.
    Quicken Mac Subscription • Quicken user since 1993
  • JP Smithers
    JP Smithers Member ✭✭
    Thanks very much for your help.
  • JP Smithers
    JP Smithers Member ✭✭
    Thanks for the recommendations. I already set up the escrow account as an asset, and was not sure how to categorize the mortgage interest. Quicken wants me to select a bank / financial institution to add a liability account, which indicates I still owe the mortgage interest I already paid. If I put the interest paid in a liability account, doesn't that indicate that I owe that money? Since this is interest already paid to the bank and not owed, I was not sure how this will affect any budgets I set up.

    I have a similar concern with escrow as an asset account, since with Quicken for Mac, all assets accounts fall under "income", but the escrow money is not income. This default setting by quicken cannot be overridden as far as I know and it inflates my actual income. I suppose I can click "hide account" in report, but this seems like a software problem with Quicken for Mac (not sure if quicken windows is any different).
    Same with home listed as an asset. Quicken says that is "income" as well in settings.
    I may change the escrow account to "cash" and add transactions manually, so quicken does not count the escrow deposits as additional income.

    Maybe I expect too much of Quicken. I appreciate any other thoughts, or suggestions for workarounds. Thanks in advance.
  • JP Smithers
    JP Smithers Member ✭✭
    Maybe I do not understand the accounting definitions behind quicken. Accounting is not my strong point.
  • JP Smithers
    JP Smithers Member ✭✭
    I now see that Quicken automatically created a "Loan" category with subcategory of "Loan Interest" when I set up the mortgage loan. This is categorized as an expense account. I will use this account to track loan interest.
  • JP Smithers
    JP Smithers Member ✭✭
    This is helpful.

    Income v Expense as follows:
    Go to "Window" then "Categories"
    The categories headings include; name, type, tax related, etc.
    Under type, the categories are primarily listed as expense or income.
    Quicken has "Adjustment" as a required category and the type is blank.

    In the past, I created categories to track transfers from one account to a different account. These transfer categories were "typed" as income by quicken, even though the transfer was not taxable income. I was just moving money from one of my accounts to another.
    The budget I created back then showed an income much greater than reality.
    Once I realized the issue, I changed the category to "transfer", without including the to or from internal account. The required "transfer" category does not have an account type, so the internal transfers no longer report as income. I also started using the transfer function built in to quicken which keeps track of money coming and going.

    My concern is since asset category type is income and loan type is expense, Quicken reports are going to show the escrow asset account as income and the ever increasing loan interest category as expense. It seems like this makes the Quicken budget reports less accurate.
    Thanks
  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Accepted Answer
    Ah, "Adjustment" and "Transfer" rear their ugly heads! ;)

    The "Adjustment" category and "Transfer" category are a special ones Quicken created which I wish they hadn't. Well, I know why they did it, but I think it confuses more people than those it helps.

    In short, I'd say do NOT use "Adjustment" or "Transfer" as a category. That makes a transaction basically invisible; it's neither income nor expense; it just adjusts the balance. I also suggest that you do not have any transactions which have both a Category and a Transfer. If you're entering a Transfer to move money from one account to another, select that account in the Transfer column, and in Category field you'll see "Transfer:[Account Name]". (As a shortcut, or if you don't want to use up the horizontal space in your register to display the Transfer column, you can also enter a transfer in the Category field by typing the open bracket -- [ -- and then trying or selecting the account you're transferring to. When you save the transaction, it will show as "Transfer:[Account Name]".)
    My concern is since asset category type is income and loan type is expense…
    Nope, nope, nope. An Asset is a type of account, not a Category type. Assets are not income. Similarly, Loans are a type of Account, not a Category and not an expense. If you move money into your escrow (asset) account as a transfer from your checking account (as a split of your mortgage payment), it will not show up as income. When you enter a payment of taxes or insurance from your escrow account, those will show up as expenses -- just as if you'd personally written the check from your checking account.

    When you pay your mortgage payment out of your checking account, and one of the split lines has Interest as the Category, this is an expense; the split line that transfers money to your loan account is not income or expense; it's a transfer of funds which reduces your checking account balance and reduces your loan account balance. The split line which transfers money to your escrow account is also not income or expense; it's a transfer of funds which decreases your checking account and increases your escrow account.

    Does that make any more sense, or are you still confused?
    Quicken Mac Subscription • Quicken user since 1993
This discussion has been closed.