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How do you set up an interest-only loan for an investment property?

omega4e

Hello, how do I set up an interest-only loan for one of my investment properties? The interest rate changes monthly. The interest-only loan is for 18 months and then will convert to an amortizing loan.

Thanks,

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NotACPA

The I/O portion is simple. It's simply a Loan account with interest only payments. When you receive these payments, just record them in Q using some Income category that you've created. You can use the Memo section of the deposit to reflect that it's part of this loan.

THEN, when it becomes an amortizing loan, simply edit the loan using Q's "Loan Wizard".

omega4e

Thank you. I am having difficulty with two things 1. not having my quicken loan account break out a portion of the interest only payment as a principal payment 2. not having the interest only payment pay down the loan.

NotACPA

But, But, But an "Interest Only" payment DOESN'T HAVE a principal payment. That's what "Interest Only" means.

That's why the "Interest Only" isn't reducing the loan balance.

Are you sure that first 18 months are "Interest only"?

omega4e

Correct, but on my quicken loan account the interest payment IS reducing my opening loan balance when it shouldn't be. When I click edit payment details it is showing part of the payment going towards principal which it shouldn't be.

NotACPA

What category are you using for that Loan payment? It should be "Interest Income" (i.e., _IntInc) and NOT the name of the loan.

The actual loan account isn't involved until the loan starts amortizing.