How do I track a construction loan?

Will Fiveash

I am looking for advice on how to track a construction loan in Quicken Classic Deluxe (Version 7.3.1) for Mac. The loan is such that I pay principal and interest (6%) on the current total amount drawn. These draws are staged over the life of the construction project so the monthly payment increases as the draws accumulate. Any help is appreciated.

Will Fiveash

Any thoughts?

jacobs

So this is a loan where the principal amount can increase with additional withdrawals and decrease as you make payments, right? It's not clear to me from your description if there is a set loan period, or if you just pay 6% interest on the loan balance indefinitely until you pay it off. In any case, you can track this as liability account in Quicken Mac.

In the liability account, record your opening transaction as a transfer to your checking account. This parallels what happened in the real world: you got money in your checking account, and you incurred a debt. Subsequent draws on the loan would be the same transaction in the liability account: a transfer to checking to reflect the cash you received.

For the payments, you'd set up a scheduled monthly payment in your checking account, with one split for interest expense and a second split as a transfer to the liability account for the principal payment. Of course, the amount of those splits will be ever-changing, and you'll have to do the calculation of the split yourself. In Quicken, as you mark each monthly payment as paid, edit the transaction to adjust split amounts. (When the loan increases and the total transaction amount increases, double-click the scheduled transaction, select Edit All Instances, and change the transaction amount.) That may sound like a pain, but it takes only a few seconds to update the split amounts each month.