How do you track interest, principle and escrow payments with online accout?

GarCar
GarCar Member
edited December 2022 in Reports (Windows)
How does Quicken record (track) the interest, principle and escrow amounts of a mortgage payments when the loan is setup online (online loan account)?

Comments

  • GarCar
    GarCar Member
    Thanks
    Would I set up the items I want to track (interest, principle and escrow) as categories? If so, i have done that before (see attached image) and I have had issues in my payment components (interest, principle and escrow) parsing correctly to the categories I set up.

    **ALSO, if I click on the loan in 'Property & Debt', the transactions do not always show up!
    I am pulling my hair out with Quicken trying to set my 2 loans up (mortgage and auto) and get the balances to at least closely match the balance as reported on my loans websites.
    I am an ex Quickbooks user and I never had these kind of issues with Quickbooks.

    I appreciate your help!
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited November 2022
    As I understand it, having never established an online loan, the setup process should be similar to establishing a manual loan Account in that you use the Quicken loan "wizard" to set up the Account.  The wizard requests all the usual information - opening balance, interest rate, term, escrow amounts (if any) and so forth. 
    When establishing the loan you should be able to determine how you want to track the escrow amounts, either as a form of current expense via a Category, (which it isn't, really), or as a balance sheet item, i.e., an Account.  If you chose to use an Account then payments will accumulate in that Account and you'll need to reduce the Account balance periodically, (expense them), manually, based on statements you receive from the lender.
    As part of the setup you can chose to have Quicken make automatic entries to your checking Account for the scheduled payments and all the elements of the payments - principal, interest, and escrow amounts - will be captured. 
    In the case of a manual loan, the principal portion of the payment will be accounted for as a transfer to the loan Account, the interest will be recorded in an interest expense Category of your choosing, and the escrow will be recorded either as an expense (Category) or transfer (Account) depending on your setup.
    In the case of a downloading loan, the payments will be accounted for in a very similar fashion except that the principal portion will now be recorded as a form of current expense, using a Category that Quicken automatically uses in this situation
    The reason for doing this is that with a downloading loan you have no loan register that you can affect, so a "transfer" won't work here.  Instead, the lender, after processing your payment, pushes the principal payment (only) into the loan Account without affecting any other Account or Category in your file.  This bit of "magic" has the effect of increasing your net worth (your liability has been reduced without affecting cash), but Quicken's use of an "expense" for the actual payment (expenses reduce your net worth) counter acts this bit of magic, making your net worth properly stated.
    So either approach - manual loan or downloading loan - should properly account for all your loan activity.  But since the lender is only sending to Quicken the principal amounts - not interest, not escrow activity - I don't see any real benefit to setting up a downloading loan, and there are drawbacks.  First, you have no access to the loan's register so any errors that might creep in are difficult to fix, and secondly, it's not uncommon that errors do occur with downloading loans given that the connection process almost certainly is Express Web Connect.
    I'd just set up a manual loan.
  • GarCar
    GarCar Member
    Thank you! This is starting to make more sense now.
    Looks like i screwed up by creating 3 expense accounts (interest, principle and escrow) and just splitting my mortgage payment between these 3 accounts. I should be able to just change the splits on my mortgage payments so they transfer (accounts with brackets) to the principle and escrow accounts as mentioned above?

    Questions:
    1) How do I transfer to a escrow account? I just see the ability to set up the account, how do i transfer to it or any other account of my choice?

    2) I can't seem to find the Quick Loan Wizard. Is this still being offered in the latest versions of Quicken (subscription)?

    Thanks!
  • GarCar
    GarCar Member
    Thanks for helping with this! Your help helped me see that setting up (a proper) escrow account is as simple as setting up a asset account and then using that account for the line item for the escrow in the splits. What was throwing me was I initially set up the escrow account (as well as the principle account) I was using as a category and using that in the splits. This looks like it is going to work out great and I might become a solid believer in Quicken. I see what you guys are saying about the auto loan tracking, it does not seem to be as accurate.

    Thanks again for your help!
  • NotACPA
    NotACPA SuperUser ✭✭✭✭✭
    @GarCar ,
    The issue with tracking loans other than traditional mortgages is that they are almost always DAILY INTEREST accounts ... where the amount of interest due this month is partially dependent upon what day of the month that prior payment was recorded.  10/11 to today , 11/12, will result in a different interest calculation than if the prior payment was recorded on 10/12.
    The Loan Calculator is intended for traditional mortgages which are almost always MONTHLY INTEREST, where the entire amortization schedule can be calculated in advance because it doesn't matter if your prior payment is received on the 1st of the month or the 10th.
    The Loan Calculator is VERY accurate when used as intended.

    Q user since February, 1990. DOS Version 4
    Now running Quicken Windows Subscription, Business & Personal
    Retired "Certified Information Systems Auditor" & Bank Audit VP

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