Recording Mortgage as Expense

aardvarker

I'm using Quicken Classic for macOS.

My mortgage is set up as a Liability account. Each month, when I pay my mortgage, the payment is recorded as a transfer from my checking to the liability account. I then manually add my interest and escrow expense to the liability account, which makes the liability account's balance match the balance on my mortgage.

To visualize, using imaginary numbers:

Mortgage account:

Feb. 15 balance: $250,000
Feb. 16 payment: -1,500
Feb. 16 escrow: +200
Feb. 16 interest: +700
Feb. 16 balance: $249,400

The problem is that in any reports, the escrow and interest show up as expenses but the payment towards principal (the difference between the total payment and the interest/escrow) does not.

I'm wondering if I should set things up differently and how you all handle this.

NotACPA

The customary way of doing this is to SPLIT the single payment in your checking account.

Say that your total payment is for $1,500. The items in the split would be:

Current loan balance: $250,000
Transfer to loan/liability: $600 (reducing it's amount to $249,400)
Transfer to Escrow (an asset account): $200 (increasing it's balance)
Interest Expense: $700

Note that ONLY the interest is an Expense. The other 2 items are Transfers that move money from one balance sheet account to another. The "expense" portion of the mortgage was when you originally took it out and any "expense" in the escrow account is when you pay your Real Estate taxes, etc.

jacobs

If you do as @NotACPA suggests, creating one split transaction which includes the transfer to the loan account and the interest expense, then in your expense resport, you will simply need tweak it to include the transfer to the loan account. The way to do this is to edit the report, click on the Accounts tab and de-select the loan account, then click the Advanced tab, and select "Include selected transfers with accounts outside of report". Set this way, your report will include transfers to the loan account, because it is not included in ("outside") the report.