Mortgage Payment Deducts Interest from Balance

echo84

Hi All,

I have found a few relevant community discussions on this topic, but with a few key differences which may have altered the outcome... I have two offline/manual mortgage accounts with the same issue, so I'm hopeful we can figure this out together.

Scenario
There is an offline/manual mortgage account configured as a mortgage loan type via the wizard, correct originating balance, interest rate, length, and compounding period and payment schedule set to monthly. Quicken correctly reports that "X" is the principal amount for each payment and "Y" is the interest amount. This is when things start to get off track: When I make a payment from my checking account, I set the category to the name of the mortgage account, which then reflects the payment in both places: my checking account and the mortgage account. That said, the entire payment amount (let's say "Z"), is being deducted from the opening balance. In reality, it should have only dedicated the portion of that payment allocated to Principal ("X"). If Quicken knows how much of the entire payment should be allocated to Principal vs Interest, then why the discrepancy? Does the transaction need to be split in a particular way for it to be calculated properly?

I'm happy to provide screenshots as needed - just not sure where to start. Any assistance would be appreciated.


Thank you!

Sherlock

To enter a loan payment, I suggest you use the loan's payment reminder or memorized payee.  For example, open the loan account, press Ctrl + Shift + N, and select Enter Loan Payment

NotACPA

I can't see, in either of your screenshots, the complete Category.  And, it appears, in SMH_MTG, that both lines are going to the same account/category.  Is that correct?

Line 1 of the split should be a TRANSFER to your mortgage loan account.

Line 2 should be the payment of the interest on the loan

Lines after that are used for:

Penny/such, rounding amounts on the principal re: what Q calculates vs what your lender calculates, and

any Escrow amounts.

I'm not sure what your 2nd graphic is showing.  Is that the payment on a separate mortgage?  Or what?  And, again, the full category name would be needed.

echo84

Hi @NotACPA,

Yes, I understand that the screenshot cut-off the full name of each category. For that reason, I mentioned: "While the Category column does not appear to be re-sizable, row 1 says "Property (Business):Mortgage" and row 2 says "Property (Business):Mortgage:Interest"." Disregard the second screenshot for now - we'll focus on one thing at a time. If we can get one account calculating as desired, I'll mimic the same on the other.

Having said that, I think your explanation of the transaction split has corrected the issue. Initially, I was essentially making a transfer of the full payment amount to the mortgage account with the expectation (reasonable or not) that Quicken would determine how much of the payment was allocated to Principal/Interest automatically. Your explanation has shown that my approach was incorrect: I should split the transaction such that only the Principal amount should be considered a transfer, and the other lines allocated to other expense categories (i.e. Mortgage Interest). I don't have escrow on these mortgages, so I can't speak to how that looks on my end.

I now understand why @Sherlock advised using the "Enter Loan Payment" window: since the Principal/Interest allocations vary by month, the user would either have to know these amounts in advance or allow Quicken to automatically split the transaction for you with the proper amounts automatically calculated. Things are starting to make sense!

After adjusting the transaction on the first payment, I see that the calculation aligns with what I expect. I will now go through the other transactions to correct them and report back. Thanks again for the support.

NotACPA

Please provide a screen shot of the SPLIT transaction in your checking account that makes this payment.  We need to see the Category, Tag and Memo columns of the split ... but not the dollar amounts.

Also, what Q product are you running and what BUILD of that product?  Do HELP, About Quicken for this info.  No screen shot, just the info, needed re: this request.

echo84

Hi @NotACPA and thanks for the quick response.

I am operating Quicken Home, Business & Rental Property, Version R32.12, Build 27.1.32.12 .

Attached is the screenshot requested ("SMH_MTG"). While the Category column does not appear to be re-sizable, row 1 says "Property (Business):Mortgage" and row 2 says "Property (Business):Mortgage:Interest". In fairness, I vaguely remember setting-up the split transaction in the past in effort to account for the amount of mortgage interest I was paying annually. My second offline/manual mortgage account does not have a split at all - please reference the second screenshot ("NXH_MTG").


Thank you

Sherlock

To enter a loan payment, I suggest you use the loan's payment reminder or memorized payee.  For example, open the loan account, press Ctrl + Shift + N, and select Enter Loan Payment

echo84

Hi @Sherlock and thanks for the response.

I notice that when I perform the steps you recommended, the payment is split. After clicking on the "Split" button to investigate further, I notice that while the amounts appear correct, the categories are the same but there is no Tag assigned. This will be important for linking the transaction to my business correctly. That said, it seems to be otherwise identical to the payments I have already made. Is there something else happening on the back-end that I'm not aware of? If the fields appear the same, then I don't see why it would alter the outcome. Not challenging your recommendation, just seeking to understand. Attached is a screenshot of the transaction split from the Enter Loan Payment -> Split screen ("SMH_MTG_LP").


Thank you

NotACPA

I can't see, in either of your screenshots, the complete Category.  And, it appears, in SMH_MTG, that both lines are going to the same account/category.  Is that correct?

Line 1 of the split should be a TRANSFER to your mortgage loan account.

Line 2 should be the payment of the interest on the loan

Lines after that are used for:

Penny/such, rounding amounts on the principal re: what Q calculates vs what your lender calculates, and

any Escrow amounts.

I'm not sure what your 2nd graphic is showing.  Is that the payment on a separate mortgage?  Or what?  And, again, the full category name would be needed.

echo84

Hi @NotACPA,

Yes, I understand that the screenshot cut-off the full name of each category. For that reason, I mentioned: "While the Category column does not appear to be re-sizable, row 1 says "Property (Business):Mortgage" and row 2 says "Property (Business):Mortgage:Interest"." Disregard the second screenshot for now - we'll focus on one thing at a time. If we can get one account calculating as desired, I'll mimic the same on the other.

Having said that, I think your explanation of the transaction split has corrected the issue. Initially, I was essentially making a transfer of the full payment amount to the mortgage account with the expectation (reasonable or not) that Quicken would determine how much of the payment was allocated to Principal/Interest automatically. Your explanation has shown that my approach was incorrect: I should split the transaction such that only the Principal amount should be considered a transfer, and the other lines allocated to other expense categories (i.e. Mortgage Interest). I don't have escrow on these mortgages, so I can't speak to how that looks on my end.

I now understand why @Sherlock advised using the "Enter Loan Payment" window: since the Principal/Interest allocations vary by month, the user would either have to know these amounts in advance or allow Quicken to automatically split the transaction for you with the proper amounts automatically calculated. Things are starting to make sense!

After adjusting the transaction on the first payment, I see that the calculation aligns with what I expect. I will now go through the other transactions to correct them and report back. Thanks again for the support.

echo84

Hi All,

Just writing back to confirm that this has resolved my concern. Now that I understand how the transaction is intended to be split, it makes total sense and the amounts are aligning with the expected values. Thank you @NotACPA and @Sherlock for your quick response and expertise!


Thank you