I'm the mortgage holder and the buyers are paying me off early - how to enter in Quicken?

sasha99

I don't know where to post this question, so a moderator is welcome to move it.

I sold a house eight years ago and carried the note. I enter the payments into Quicken every month, split into principal and interest. The buyers are paying the note off early-- tomorrow, in fact.

The original note was for $190,000. The balance right now including future interest is $108,152. The payoff amount at this point is $105,352. Do I post that amount in the same way/place I normally post a monthly payment? I have the amortization table, so I can split it into principal and interest.When I post that amount, how do I tell Quicken to retire that note?

I tried googling this but putting "retire" and "mortgage" in the question launched me off in a totally other direction. Thanks.

Tom Young

"The balance right now including future interest is $108,152. The payoff amount at this point is $105,352."

I don't understand this.  The "balance" of an amortizing loan reflects the principal outstanding "as of" a date.  It doesn't include some amount of "future interest", whatever that is.  Accordingly the payoff amount for a normal amortizing loan should be the principal outstanding as of that date plus any interest accrued in arrears from the last regular payment to the payoff date.    Maybe you could explain how this $108,152 amount is calculated?  That would be helpful to get the "most correct" answer. 

If you're getting $105,352, which I assume includes some amount of interest, then you deposit that $105,352 in your bank and split that amount between the interest and principal elements.  That will leave some amount in the loan Account outstanding - an amount somewhere in the range of $2.8K it appears.  You will then go into the loan Account and make an entry to write off the remaining amount.  You'll enter that $2.8K in the "Decrease" column with an offset to some sort of Category or Categories, the nature of which is unclear since nobody here knows what the "missing" $2.8K represents.  You might end up categorizing that $2.8K to "Miscellaneous Expense" or some sort of "Loss on Payoff of loan" Category that you create.

sasha99

Tom asked, "Maybe you could explain how this $108,152 amount is calculated?" I assume Quicken calculated that that is what I would wind up getting in "future interest" if they continued to pay the mortgage until 2028 which they originally signed up to do.

However, you DID answer my question in your second paragraph. When I deposit the $105K, Quicken will show $2.8K still owing to me, and I can deal with it as you suggested. "Loss on payoff of loan" is EXACTLY what that is. Thank you.

NotACPA

When you post that payment, the value of the note should show as $0.  Then, you can simply close the account.

sasha99

Thanks. Maybe I wasn't clear on this: They're paying off the note early. Quicken shows the current balance to be $108,152. Tomorrow I will be posting the amount $105,352. What do I do about the extra $$?

sasha99

Question not answered.

Tom Young

"The balance right now including future interest is $108,152. The payoff amount at this point is $105,352."

I don't understand this.  The "balance" of an amortizing loan reflects the principal outstanding "as of" a date.  It doesn't include some amount of "future interest", whatever that is.  Accordingly the payoff amount for a normal amortizing loan should be the principal outstanding as of that date plus any interest accrued in arrears from the last regular payment to the payoff date.    Maybe you could explain how this $108,152 amount is calculated?  That would be helpful to get the "most correct" answer. 

If you're getting $105,352, which I assume includes some amount of interest, then you deposit that $105,352 in your bank and split that amount between the interest and principal elements.  That will leave some amount in the loan Account outstanding - an amount somewhere in the range of $2.8K it appears.  You will then go into the loan Account and make an entry to write off the remaining amount.  You'll enter that $2.8K in the "Decrease" column with an offset to some sort of Category or Categories, the nature of which is unclear since nobody here knows what the "missing" $2.8K represents.  You might end up categorizing that $2.8K to "Miscellaneous Expense" or some sort of "Loss on Payoff of loan" Category that you create.

sasha99

Tom asked, "Maybe you could explain how this $108,152 amount is calculated?" I assume Quicken calculated that that is what I would wind up getting in "future interest" if they continued to pay the mortgage until 2028 which they originally signed up to do.

However, you DID answer my question in your second paragraph. When I deposit the $105K, Quicken will show $2.8K still owing to me, and I can deal with it as you suggested. "Loss on payoff of loan" is EXACTLY what that is. Thank you.

Tom Young

"Tom asked, 'Maybe you could explain how this $108,152 amount is calculated?' I assume Quicken calculated that that is what I would wind up getting in 'future interest' if they continued to pay the mortgage until 2028 which they originally signed up to do."

Could you tell me where in Quicken you're seeing that $108K number?  I've entered a few loans in Quicken both as borrower and as lender and the only "loan balance" I'm familiar with is the loan balance that reflects all past payments of principal.  So any Net Worth or Account Balances report I've ever run, anytime that I've looked at the Account Bar (vertical column to right or left of the screen) or in the loan register itself, anything called "balance" reflects the history of payments.   Nothing I've seen in Quicken could be characterized as "today's outstanding principal plus all the interest you should earn until the loan pays off." 

Accordingly, if I paid off a loan early or got paid on a loan I've made early, the amount paid or received - the payoff amount - was the principal balance in Quicken as of the date of payment plus accrued interest.

By any chance are you having this loan serviced by somebody and they provided the payoff amount?

sasha99

"By any chance are you having this loan serviced by somebody and they provided the payoff amount?"

No. The payoff amount was calculated by my accountant based on the amortization table she set up when I sold the house and decided to carry the note.

On past loans when you've been the lender, how did you show the interest income in Quicken? When I get the monthly mortgage payment and post it, a substantial portion of it is interest. There were 86 payments left on this mortgage and every one of them contained a big chunk of interest. Because they're paying the loan off seven years early, I'm foregoing that interest. But Quicken is expecting that interest, and telling me to call it "loss on payoff of loan" solves the problem neatly. The fact that you made that suggestion tells me you at least partially see what I'm getting at. I'm not able to grasp where our disconnect is.

Here's the list of my Quicken accounts showing the balance of $108,152. (I'm also carrying another mortgage. If you want to sell a house that's completely paid off, it beats the heck out of being a landlord!)

Tom Young

"The payoff amount was calculated by my accountant based on the amortization table she set up when I sold the house and decided to carry the note."

Then that's the disconnect right there.  There must be some difference between Quicken's amortization schedule and your accountant's.  Quicken absolutely does know how to create an amortization schedule for a "normal" mortgage loan and the balance it presents is "as of" whatever date you're asking about.  There's no "future interest" payments in the presentation.   That's because the sum of the discounted amounts all those future payments - principal and interest - mathematically comes right back to "today's" principal balance.  Paying off a loan earlier than the original term should not, ordinarily, result in a gain or a loss.

It might be interesting to figure out why the two amortization schedules got out of whack but since the payoff amount is now written in stone you certainly have to book some kind of loss to zero out the loan balance in Quicken.

sasha99

I guess we'll just have to put this in the file with Bigfoot and the Loch Ness Monster. I'm satisfied with the numbers, and my accountant/tax preparer of 40 years is, too. I will make use of your suggestion, and I thank you for it. All the best to you.