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How to record extra principle payments

Forgive me for the simple question. I am really new to this
I have three accounts

Acct A: Under the Banking tab: Banking Acct: MyBussiness,LLC
Acct B: Under the Rental Property tab : 123 Main St
Acct C: Under the Property & Debt tab: A manually entered Mrg. loan linked to [123 Main St]

If I make an extra payment during the month to the mortgage from the MyBusiness,LLC.
How would I record that payment in Acct B AND C?
and will the stats in Acct C reflect that extra payment to show the change in future principle vs. interest ratio?

Thank you so much

Answers

  • Mark1104Mark1104 Member ✭✭✭✭
    not sure why you'd make an entry under Acct B.  That extra payment is all principle reduction and there should be no "expense' associated with it.  That payment should reduce your banking account balance (acct A) and reduce your loan balance (Acct C) by a similar amount. 

    the future interest / principal split would be different
  • NotACPANotACPA SuperUser, Windows Beta Beta
    Assuming that the mortgage is a traditional fixed-rate type, the payment of additional principal will:
    1) alter your future payment amortization (since there will be less principal against which interest is charged), and
    2) move forward (closer to today) the date when the mortgage is paid off.

    It won't change the amount of the monthly payments.
    Q user since DOS version 5
    Now running Quicken Windows Subscription,  Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • AhmedAhmed Member ✭✭
    Thank you both. If the payment does not need to be in Account B. then what purpose does account B serve? I thought the rental property module is to show all the income/expenses for that particular property!
  • Mark1104Mark1104 Member ✭✭✭✭
    principle payments are not a revenue or an expense.  it's a reduction in a liability. 
  • AhmedAhmed Member ✭✭
    I feel silly asking now that you say that. It makes perfect sense. With that being said, just a hypothetical.

    Rent income $800
    Mortgage and interest $300

    Account A (Business) get s a deposit of $800 and an expense of [mortgage etc] for $300

    Account C (Mortgage Loan Account) get a deduction of liability with the appropriate amount of principle vs interest calculated by Quicken.

    My mind can't seem to to wrap around the idea that
    Account B (under the Rental Property Tab) now shows an increase of $800, but no decrease of the $300 that was paid out. Overtime Account B will keep showing increased by $800 but but not decreasing.

    Am I seeing this all wrong? or is the rent payment not even recorded in Account B :-) What is Account B for that Quicken generated when I added a rental property?
  • NotACPANotACPA SuperUser, Windows Beta Beta
    edited August 2020
    Account B (i.e., the property itself) is an asset that offsets the liability of the loan.
    The value of the property DOES change over time, but that's as a result of market forces and any improvements that you make ... NOT as a result of your loan payments.
    Your loan payment:
    1. Reduces your checking account (Acct A)
    2. Reduces your mortgage liability (not referenced in your scenario)
    3. Increases your Escrow account (if you have one)
    When Insurance and Real Estate Tax payments are made (2 common reasons for an escrow account) they're paid out of the Escrow account, thus reducing it.  An Escrow account is, in it's essence, a forced savings account for these future expenses.
    Q user since DOS version 5
    Now running Quicken Windows Subscription,  Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
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