sale of rental property and pay off of mortgage

plichtenwalner

How do I enter a payoff of my rental property mortgage when the money to pay it off did not come directly from me- the closing attorney paid it off at the closing, so we never had the cash in any of our accounts. I've seen lots of answers about making a transfer from your checking or savings account (which I know how to do), but the money was never in any of those accounts.

For what it's worth, I'm pretty sure I am not using all the rental property tools correctly (we lived in this house first, so I always just had it as an asset, not necessarily a rental property). But I still want to update the mortgage as paid.

Tom Young

I assume that, broadly speaking, the attorney  was acting as the escrow agent for the transaction and, accordingly, should have provided a closing document to you outlining all the elements of the sale.  The "bottom line" of the closing statement would be the "cash to you", the amount you deposited in your checking account. 

In order to accurately account for all the transactions listed out on the seller's closing statement you need to employ the fiction that all that activity passed through your checking account.  But that can be fairly difficult to do and if all you want to do is eliminate the mortgage, simply go into the mortgage Account and in the "Decrease" column enter the balance of the loan that you paid.  In the Category box enter the name of the loan Account, surrounded by square brackets, e.g., [Name of Mortgage Loan Account].  That will "magically" eliminate the balance of the loan without affecting any other Account or Category.