How to setup a mortgage refinance

johnharnly

Apparently, this question made the rounds last year without a satisfactory response so the conversation was closed. I'm sure there is (and will be) a large number of mortgage refinancing going on so it would really be helpful to have some guidance on how best to deal with the old loan account as well as the new loan.
Here is the original post from ~January 2019:

"How about Quicken set up a window for mortgage refinance or at least add instruction notes on their help site to enter a new mortgage (refinance) and close an existing mortgage it is replacing."

Boatnmaniac

To set up a refinance mortgage:

1. Set up the new mortgage loan for the full amount of the new mortgage.
2. After setting it up, go to the Payment Details of the new mortgage loan.
3. Click on the Opening Balance transaction category field, click on the down arrow to the right of the category shown and click on "Split".
4. Click on the 2nd line of the Split Category popup and enter a transfer to the old mortgage (mortgage name in brackets).  Enter the old mortgage current balance for the amount.
5. On the 1st line of the Split, change the dollar amount to the difference between the new mortgage amount and the old mortgage current balance amount.  The transaction total for both categories in this Split should be equal to the total amount of the new mortgage.  (Ex: New mortgage amount = $105,000 and old mortgage current balance amount = $100,000, so enter $5,000 for the amount of the 1st line of this Split category.  Total amount of the Splits = $105,000.)
6. Click "OK" to close the split category popup and then click "Save" to save the transaction.
7. Your old mortgage should now show a current balance of $0.00.  You can now go to the old mortgage Account Details and, if you want, on the Display Options tab, close or hide it.
   

Boatnmaniac

I should have also mentioned that if you have mortgage payment transactions in your checking account for those missing payment records in the Mortgage register, then you can just edit those entries instead of creating new ones in a Cash account.  All you'd need to do is change the category to the split categories noted above.  And to be most accurate, adjust the dates of those entries to match what your mortgage statements show.

Boatnmaniac

To set up a refinance mortgage:

1. Set up the new mortgage loan for the full amount of the new mortgage.
2. After setting it up, go to the Payment Details of the new mortgage loan.
3. Click on the Opening Balance transaction category field, click on the down arrow to the right of the category shown and click on "Split".
4. Click on the 2nd line of the Split Category popup and enter a transfer to the old mortgage (mortgage name in brackets).  Enter the old mortgage current balance for the amount.
5. On the 1st line of the Split, change the dollar amount to the difference between the new mortgage amount and the old mortgage current balance amount.  The transaction total for both categories in this Split should be equal to the total amount of the new mortgage.  (Ex: New mortgage amount = $105,000 and old mortgage current balance amount = $100,000, so enter $5,000 for the amount of the 1st line of this Split category.  Total amount of the Splits = $105,000.)
6. Click "OK" to close the split category popup and then click "Save" to save the transaction.
7. Your old mortgage should now show a current balance of $0.00.  You can now go to the old mortgage Account Details and, if you want, on the Display Options tab, close or hide it.
   

johnharnly

That was brilliant! Had already closed the old mortgage so I had to restore the latest backup to implement your procedure. Worked great, thanks!

Alnavarro

Worked very nicely to set up the refinanced mortgage liability. But doesm't explain how to record the additional cashout amount or the fees and prepaid interest of the new mortgage. How will I record these?

Alnavarro

By the way, where did the interest expense go from this transaction? The mortgage balance shown is correct following four months of payments, but where are the cash payments and the interest expense recorded?

Boatnmaniac

Alnavarro said:

Worked very nicely to set up the refinanced mortgage liability. But doesm't explain how to record the additional cashout amount or the fees and prepaid interest of the new mortgage. How will I record these?

You can add more category lines for these things in the Opening Balance split category.  Once they are entered, reduce the amount of the 1st line in the split category by the total of what you entered for these items.

Boatnmaniac

Alnavarro said:

By the way, where did the interest expense go from this transaction? The mortgage balance shown is correct following four months of payments, but where are the cash payments and the interest expense recorded?

The payment transactions are recorded in the same register where the Opening Balance transaction is recorded but what is shown there is the amount of principal that was paid.  To see how the total of each payment are broken out between principal and interest for both completed payments and for future payments click on the "View payment schedule button" (circled in red) which pulls up the Loan Schedule popup.

Alnavarro

Although the register shows the correct total principal reduction for the four payments which were made prior to the date I entered this loan into Quicken, the "Loan Schedule" does not show these payments, nor do I see that interest expense was recorded in any interest category. The Loan Schedule shows that my next payment is no. 2, whereas it should be no. 5.

Alnavarro

Was this problem caused because when I set up the loan I did not check the box to have payments automatically charged in the register? I subsequently changed that option, but I still don't see the previous payments in the Loan Schedule.

Boatnmaniac

No, your loan was taken out on 12/17/2019 but your loan in Quicken was created on 5/9/2020.  During the loan set up process you were asked to enter the original loan amount (so Quicken can calculate an accurate payment schedule) and you were also asked to enter the current (5/9/2020) loan balance.  In this type of situation, Quicken will simply enter a balance adjustment to make the current balance in Quicken match your loan statement.  It will disregard any payment details for any dates prior to the date the loan in Quicken was created.

Alnavarro

So, to correct my Quicken entries, I assume that I can delete the balance adjustment, then manually enter the four payments which were made prior to 5/9/2020? I think this necessary to correct the balances for cash and interest expense. Do you think it makes any difference whether I make these register entries in the Cash account or the Loan account? I assume that Quicken will then pick up the automatic entries with next month's payment?

Boatnmaniac

You are on the right track.  Yes, which account you make the entries in will make a big difference.  Make the entries in your Cash account.

What I would do is:

1)  Back up my Quicken file in case something goes wrong.

2)  Delete the balance adjustment from the mortgage register.

3)  In the Cash account register, make split category entries for each payment actually made before 5/9:

• For the most accurate results pull the principal and interest data from your mortgage statements (or your online account with the lender) and make sure to use the dates the payments actually posted with the lender.
  
• Enter the total amount for each payment.
  
• In the first line of the split category, enter a transfer to the Mortgage account in the amount of the principal paid.
• In the second line of the split category, enter the category for Mortgage Interest (or whatever is you default category for this) and enter the amount of the interest paid.

As you make each entry Quicken will recalculate the payments schedule so it might take a little longer for each transaction entry to be completed.  Quicken will also renumber the future payments so when you are done the payment numbers should match what the lender shows.

One thing I didn't check out is how making these entries might affect is the Bill Reminders.  I don't think it will adversely affect them but you'll want to verify that when you are done. 

Let me know how it works out for you.

Boatnmaniac

I should have also mentioned that if you have mortgage payment transactions in your checking account for those missing payment records in the Mortgage register, then you can just edit those entries instead of creating new ones in a Cash account.  All you'd need to do is change the category to the split categories noted above.  And to be most accurate, adjust the dates of those entries to match what your mortgage statements show.

Alnavarro

I should have mentioned that I am a retired accountant. I was going to do exactly what you indicated above, though I wasn't sure about using the Cash account, although that makes sense. All worked well! I won't know about the Bill Reminder until the next payment comes up near June 1. I can let you know. By the way, I'm sure that I am not the first Quicken user to do a mortgage refinance, then entered this activity into Quicken some months after the event. Quicken needs to explain the "adjustment" business in their support documentation. I spent hours trying to get the refinance worked out in Quicken, hours spent unnecessarily. I don't know whether you are a Quicken employee or an expert user, but I hope you will encourage Quicken to update their documentation on mortgage refinances. And, also, thanks for all your help!

Boatnmaniac

@Alnavarro - I'm glad everything has worked out for you.  Yes, please do let me know how the next payment works out for you. 

I'm just a user like you so I learn from what others post here and by (a lot) of trial and error.  I started to use MS Money in the mid-1990s and became a Quicken convert when MS stopped support of Money in 2009.  Both programs were very similar so it wasn't too hard to make the switch.  Despite all that background there are people in this Community that sometimes make me feel like a Quicken novice.  (BTW, the Quicken employees in Community have UserIDs that start with "Quicken".)

I do agree that Quicken could sometimes do a better job of procedure documentation but I'm usually pleasantly surprised to find out how much is really available on Quicken.com, the program's Help and in this Community.  For me the issue is more about organizing that information in a way that is easier to find and navigate.

I'm a retired supply chain guy.  While not an accountant, numbers crunching, budgeting, cost/benefit analysis, risk management and P&L's were a huge part of my life for 35 yrs.  When I retired I was so looking forward to getting away from all that....and then I found out it wouldn't let me do that.  Now I manage not only my wife's and my financials and budgetary planning, but also those of my brother, my mother and my mother-in-law, each with their own Quicken file.  I also keep a test file that I play around with a lot to find out what works, what doesn't and what breaks Quicken.  I also spend a fair amount of time reading through Quicken Help and these Community posts, both of which are rich in information.  So, yeah, I guess you can say I'm a glutton for punishment!